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Global Credit Research - 19 Mar 2012
London, 19 March 2012 -- Moody's Investors Service says that Spain's fiscal outlook
remains challenging despite the recently revised deficit targets.
The easier targets do not affect the country's A3 government bond
rating with negative outlook because Moody's had already incorporated
a likely deviation from original fiscal targets and a slower pace of fiscal
consolidation into its analysis of Spain's creditworthiness.
This is the conclusion of a new Moody's Special Comment which assesses
recent developments in Spain's public finances.
Moody's new report, entitled "Spain: Fiscal outlook
remains challenging despite easier targets" is now available on
www.moodys.com. Moody's subscribers can access this
report via the link provided at the end of this press release.
After announcing an even higher deficit for 2011 than previously expected
(8.5% of GDP versus a target of 6%), the Spanish
government first raised its deficit target for this year from 4.4%
to 5.8% of GDP -- but then lowered it somewhat to 5.3%
in response to objections from the EU Commission. The government
has maintained unchanged its commitment to reducing its budget deficit
to 3% of GDP in 2013 at the general government level. The
authorities have also recently announced measures to help alleviate the
liquidity pressures at the sub-sovereign level.
While the revised fiscal target for 2012 is more realistic than the previous
one, Moody's believes that the Spanish government will still
need to implement a substantial fiscal adjustment this year. Several
measures have already been identified, but these will not be sufficient
to reach the overall budget deficit target, according to Moody's.
In particular, the rating agency continues to see significant risks
regarding the ability of Spanish regions to reach their aggregate target
this year without profound structural reforms. Moody's stresses
that these reforms are also essential if Spain is to have any chance of
reducing the budget deficit further to 3% of GDP in 2013,
as agreed with the EU Commission.
Moody's views positively the recent change in the government's
policy stance to promote a more stable and well-established liquidity
framework for the regions. The rating agency assesses the size
of the new liquidity facilities to be commensurate with the outstanding
commercial liabilities of Spanish sub-sovereign entities.
However, Moody's believes that these measures do not address
the fundamental reasons for the commercial debt accumulation, which
are related to structural issues (such as, for instance, the
growth in healthcare expenditure) as well as problems of market access
for sub-sovereigns.
Subscribers can access this report via this link: http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_140666
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Bart Oosterveld
MD - Sovereign Risk
Sovereign Risk Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
David Rubinoff
MD - Sub-Sovereigns
Sub-Sovereign Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
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Moody's: Spain's Fiscal outlook remains challenging despite easier targets
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