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MOODY'S

Spain’s debt rating raised again on growth hopes

Ratings agency Moody's on Friday raised Spain's sovereign debt grade, citing improved growth prospects and a stronger banking sector.

Spain's debt rating raised again on growth hopes
An aerial shot of Madrid's financial district on Paseo de la Castellana. Photo: Enrique Dans/Flickr
The upgrade reflects the government's steps to “address the weaknesses in the banking sector” and an “increasingly balanced growth profile,” despite remaining “institutional weaknesses,” the agency said in a statement.
   
The agency moved the debt rating up a notch to the upper-medium investment grade Baa1 and said the rating outlook remained stable. The decision follows similar moves by Fitch and S&P Global earlier this year. Spain was downgraded in 2012 by all major ratings agencies amid fears Madrid could require a bailout due to the weakness of its banks.
   
Spanish Prime Minister Mariano Rajoy welcomed the fourth debt upgrade, saying that thanks to the governments reforms and “the efforts of all Spaniards, confidence in Spain has increased.”
   
“We cannot stop now,” Rajoy said on Twitter.
   
According to Moody's, the political crisis in Catalonia province, which has sought to secede from Spain, has “abated somewhat” and has so far not harmed Spain's fiscal or economic performance.
   
“While we expect political tensions between the central government and pro-independence forces in Catalunya to remain elevated for the foreseeable future, our baseline is still that Catalunya will remain part of Spain,” 
Moody's said. Catalonia accounts for 20 percent of Spanish GDP. 
 
The Spanish government's difficulties in setting a budget, which were due in part to the crisis with Catalonia, should not cause a “negative policy shift” in the coming years, the statement said.
   
High economic growth of three percent in recent years should moderate towards 1.5 to two percent in the medium term, it said.
   
Spanish banks' stock of non-performing loans has been falling steadily since late 2013, hitting 7.4 percent as of the end of 2017, down from 12.9 percent four years earlier.

GREECE

‘Democracy’ the winner in Greece: Podemos

The leader of Spain's leftist Podemos party on Sunday hailed results from Greece's referendum showing voters decisively rejecting creditors' bailout terms as a victory for democracy.

'Democracy' the winner in Greece: Podemos
"Today in Greece democracy has won," said leader of Podemos, Pablo Iglesias. Photo: Iakovos Hatzistavrou/AFP

“Today in Greece democracy won,” Podemos leader Pablo Iglesias, a close ally of Greek Prime Minister Alexis Tsipras, posted on his Twitter page.

Another senior Podemos member, Rafael Mayoral, who was in Greece for the referendum, added: “Joy is in air at Syriza headquarters.”

Spain's conservative Prime Minister Mariano Rajoy – who had urged Greeks to accept the bailout proposals – called for an emergency meeting of the country's economic affairs committee on Monday.

Vice president Soraya Saenz, Economy Minister Luis de Guindos and Finance Minister Cristobal Montoro will be among those attending the crisis talks on the Greek vote.

The conservative government has nervously been eyeing the Greek debt saga, warning that a replay of Syriza's policies could derail the Spanish economy's recovery from the worst downturn in its democratic history.

Spain grew by 1.4 percent last year, its first full year of growth since a property bubble burst in 2008, putting millions of people out of work.

But its jobless rate was stuck at 23.78 percent in the first quarter, the highest rate in the eurozone after Greece's which stood at 25.6 percent in March.

With less than six months to go before a general election at the end of the year, Rajoy's ruling Popular Party is also under pressure from Podemos and the main opposition Socialist Party in opinion polls.

Madrid's new leftist mayor Manuela Carmena, who swept to power last month on an anti-austerity platform backed by Podemos, posted on her Twitter account as the Greek votes came in: “Nobody who believes in democracy can contest the result of a referendum. Let's govern by listening.”

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