Spain became the first country to lose its triple A credit rating from Standard & Poor??s since Japan in 2001, spurring a slide in the euro as the economic outlook for Europe worsened.
S&P said it had downgraded Spain??s long-term sovereign debt because of its deteriorating public finances.
The decision, which is likely to increase borrowing costs for the Madrid government and for Spanish companies, highlighted strains within the eurozone between its relatively robust northern economies and those in the south ?? Spain, Portugal, Italy and Greece ?? that would benefit more from a devaluation of the single currency.
The euro fell against the dollar and the yen, while the spread in bond yields between Spain and Germany, Europe??s biggest economy, widened to record levels. The cost of insuring Spanish government bonds against default through credit default swaps also rose to a record high, with investors concluding that Spanish assets had become riskier.
S&P lowered its rating by one notch to double A plus, arguing that the global economic crisis had highlighted ??structural weaknesses? in the Spanish economy that were inconsistent with triple A, the highest rating.
