Madrid: Ratings agency Moody’s said on Wednesday it has put Spain on review for a possible downgrade because of its high funding needs, doubts over its banking sector and concerns surrounding regional finances.
The euro extended the day’s losses on the announcement.
Spain has been under intense scrutiny from international markets since Ireland was forced to take a €85 billion aid package in November on worries over similarities between their property and banking sectors.
The government has firmly denied it would also need to apply to the European Financial Stability Facility (EFSF) and rejected any comparison between its own economic position and Ireland’s.
“Moody’s does not believe that Spain’s solvency is under threat and in its base case assumptions does not expect the Spanish government to have to ask for EFSF liquidity support,” Moody’s lead analyst on Spain Kathrin Muehlbronner said in a statement.
“However, Spain’s substantial funding requirements, not only for the sovereign but also for the regional governments and the banks, make the country susceptible to further episodes of funding stress.”