Spain's downgraded credit rating

Guardian:

Wall Street stocks slipped and the euro weakened against the dollar after Spain todayy lost its coveted AAA credit score from Fitch, the second ratings agency in a month to downgrade the country.

As the Spanish government battled to push through €15bn (£12.7bn) of spending cuts, Fitch cut its sovereign debt rating for the nation by a single notch from AAA to AA+. The move, which followed a similar downgrade by Standard & Poor's four weeks ago, fuelled fears of contagion throughout the eurozone.

Fitch's analyst, Brian Coulton, said the challenges facing Spain in implementing austerity measures were behind the move: "Despite government debt and associated interest costs remaining within the AAA range, Fitch anticipates the economic adjustment process will be more difficult and prolonged than for other economies with AAA-rated sovereign governments."

In New York, the blue-chip Dow Jones Industrial Average slid lower on the downgrade, closing down 122 points to 10,136. The euro slipped by 0.8 cents against the dollar, ending at $1.2293, down from $1.32 a month ago. Economists said the development came as little surprise. A week ago, Spain's central bank was obliged to take control of a troubled regional savings bank, CajaSur, after a merger with a competitor fell apart.

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While no one wants to see their credit rating drop, and I have certainly been critical of Spain's socialist economy, a "AA" rating is still and "investment grade" rating and is a long way from junk bond status. It means the countries debt will carry a slightly higher interest rate and the drop in prices reflects that new rate. It should not portend a steep decline at this point.