- Kathrin Muehlbronner, an analyst at Moody's
Spain is widely expected to miss its public deficit target this year, leaving its sovereign rating at risk of slipping below investment grade, credit agency Moody's said on Tuesday. Even though Spanish government implemented severe austerity measures and managed to cut its public deficit to 7% of gross domestic product last year, missing its target of 6.3%. Moreover, it is also unlikely to meet this year's ambitious target of 4.5% and the objective for the next year will only be met in case the government will cancel planned tax cuts.
"Whilst acknowledging the progress in fiscal consolidation that Spain has achieved at all government levels, the outlook on Spain's government bond rating remains negative given the continued challenges it faces in meeting the deficit targets," Moody's wrote in a note.
"When we did our last rating action we said we do attach quite a high likelihood for Spain's having to ask for an ESM precautionary credit line -- that is embedded in the current rating," Kathrin Muehlbronner, an analyst at Moody's, said in an interview in Madrid today."
© Dukascopy Bank SA