The Dow Industrials have given up a 14-point gain for the morning, dropping 6 points to 10,986 after Standard & Poor’s announced a short while ago that it has cut Spain’s sovereign credit rating to AA from AA+, with expectations for growth now dimmer for the country than previously thought. (Free registration is required to read the press release.)
“Spain is likely to have an extended period of subdued economic growth, which weakens its budgetary position,” writes analyst Marko Mrsnik. Mrsnik yesterday cut his rating on Portugal and reduced Greek sovereign debt to junk status.
The Spanish government has projected a deficit this year of 9.8% of GDP, and that’s probably right, thinks Rrsnik, but it’s quite possible revenue will be lower than the government expects and costs higher, he believes. That means the country could still be running deficits of 5% by 2013.
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