National News Journal: Spain's Economy Weakend

Ratings agency Standard & Poor's cut Spain's rating a single notch to AA, as it forecast that the country's economic growth will be weaker than expected over the next six years. The market reaction was more muted than yesterday, when Greece's debt was cut to junk and Portugal downgraded, but markets across Europe ended the day lower. The euro sunk to its lowest level in a year against the dollar. The prospect of a country defaulting on its debt has plagued financial markets all year, as investors are confronted with the pain the global slowdown has inflicted on already indebted countries. Greece has already turned to the International Monetary Fund for a bail-out, as the cost of refinancing its debt soars. "We are becoming increasingly concerned that the crisis in Greece could pose as big a risk to the global economy and financial markets as the collapse of Lehman Brothers did in September 2008," said analysts at research house Capital Economics. "The shock value of a sovereign default in Greece would be much larger than the frequent defaults in emerging markets. The pressure is building on European leaders to strike a detailed agreement with Greece on the scale of the bail-out it will receive. Angela Merkel, the German Chancellor who is facing domestic resistance to any bail-out, said today that it's "completely clear" negotiations between the IMF, Greece and the European Commission need 'speeding up.'