Spain: Moody's puts Spain on notice
December 20, 2010
On 15 December, Moody's put Spain's Aa1 credit rating under review, amid concerns about the country's mounting debt and future funding needs. Moreover, the latest regional data reflects widening deficits throughout Spain's autonomous regions, adding to concerns about the central government's ability to control regional budgets. Despite the Moody's announcement, Spain's Treasury was able to place EUR 2.4 billion (USD 3.2 billion) of bonds on 16 December, of which 70% was bought by overseas investors. The Treasury intended to raise as much as EUR 3.0 billion (USD 4.0 billion) in its last 10-year bond sale of the year, less than the normal target, as Finance Minister Elena Salgado said the nation would reduce issuance amid increasing borrowing costs. In an attempt to convince investors that Spain will meet its refinancing needs next year without seeking a European bailout, the government presented a set of additional measures to narrow the fiscal deficit. These measures include the partial privatization of Spanish airport operator AENA (49%) and the National Lottery (30%) as well as ongoing reform of the pension system (lifting retirement age from 65 to 67 by YEAR). Labour unions threatened with yet another general strike in January if the government implements the pension reform.