Spain takes umbrage at Standard & Poor’s downgrade

The government on Thursday rejected the rationale behind Standard and Poor’s decision to lower Spain’s sovereign credit rating by two notches to BBB-, leaving it just above junk status.

“This surprised us; we did not expect this change,” the secretary of state for the economy, Fernando Jiménez Latorre, told reporters. “The government’s determination to continue with reforms and in correcting the deviation in the deficit is absolute.”

S&P based its decision for the downgrade on the weak state of the economy and questioned the government’s ability to reach the deficit targets it had set. It also pointed to growing political unrest among the regions because of the austerity drive.

“The agency could reconsider the quality of Spanish public debt once the targets set have been reached,” Latorre said. The official said S&P had failed to take into account the impact on growth of the reforms the government is implementing.

The European Commission spokesman on economic affairs, Simon O’Connor, declined to comment on the downgrade, adding that Brussels is currently working on its fall forecasts for the European Union and the euro zone, which are die to be released on November 7.