Just in time for the US three-day Memorial Day weekend, Fitch has downgraded Spain’s long-term foreign and local currency issuer default ratings to AA+ from AAA. The news wrecked the American market pushing down stocks 1.1% in light afternoon trading.
The Spanish government recently released data the it would miss its GDP forecasts. It said gross domestic product would rise 2.5% in 2011 compared to a previous estimate of 2.9% The nation said unemployment in 2011 would be 18.9% against 20% this year. It forecasts that the jobless rate will still be as high as 16.3% in 2013. The news caused the euro to sell down to $1.229.
The Spanish parliament passed new austerity measures by a small margin and there is still a strong possibility that the civil unrest likely to be caused by high taxes and wage cuts will cause significant enough unrest to undermine an already badly damage economy.
Douglas A. McIntyre
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