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Moody’s Downgrades Spain

Ratings agency Moody’s Investors Service has downgraded Spanish government debt one notch as the country’s banking system struggles to meet capital needs, according to The Wall Street Journal.

Ratings agency Moody’s Investors Service has downgraded Spanish government debt one notch as the country’s banking system struggles to meet capital needs, according to The Wall Street Journal. On Thursday, Moody’s lowered its rating for Spanish debt to Aa2 with a negative outlook from Aa1 previously, citing the massive capital needs of the country’s banks, even under the best scenario. The report said that the Spanish banking industry needs between €40 billion and €50 billion, although warned that the range could be as high as €110 billion to €120 billion under a more adverse scenario.

Meanwhile, the Bank of Spain issued its own estimate for the country’s banking needs, which it put around €15.15 billion in new capital. The rosier estimate from the government not only contradicted the figures from Moody’s, but rival Fitch Ratings also put the figure far higher, at €38 billion to €96.7 billion in new capital. Part of the discrepancy is due to different accounting measures used by the government, although the downgrade has still contributed to renewed fears over the stability of the eurozone as the sovereign debt crisis continues to loom over the region.

Click here to read the story from The Wall Street Journal.

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