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Moody's downgrades Spain's sovereign debt three notches

 

International rating agency Moody's downgraded on Wednesday the Spanish sovereign debt from A3 to Baa3 with a negative outlook.

Moody's explained that the bailout the Spanish government is intended to ask is one of the main reasons of this decision as the move will increase the debt of the country.

In line with the sovereign rating, Moody's also cut the ratings of the Fund for Orderly Bank Restructuring (FOBR), from A3 to Baa3.

The FOBR is the organism of the Spanish government that will be in charge of channeling the loan provided by the European Union to those banks needing a bailout.

The review of this rating, said Moody's, will be based on the results provided by the external audits, conditions and details of the loan and strategies the banks will carry out to achieve their reorganization.

Since Spain announced the intention of asking for a bailout of up to 100 billion euros (about 126 billion U.S. dollars), uncertainty has increased within the Spanish stock market, due to the lack of precision regarding the agreement.

 

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