Rating company Moody’s issued a warning for Spain about the possibility of the country’s debt rating being reduced, forcing Spain’s financial situation under an unwanted looking glass close to a summit of EU leaders that will be starting on Thursday.
Although the ratings agency manifested concern regarding the country’s need for debt funding, the situation of its bank and regional financial policies, Moody’s does not anticipate the need of a bailout like in the case of Ireland and Greece.
About the same time the troubles in Ireland were making the headlines, Spain and Portugal raised flags that they could come in need of a bailout. The market pressure on Spain was considerable over the past few weeks, as a JP Morgan analysis revealed Spain might have to refinance some 60 billion euros at the start of 2011.
The Spanish Economy Minister Elena Salgado underscored that movements on the market were being blown out of proportion in the context of low year-end trading volumes. She added that EU states should make sure to increase the European financial rescue fund in order to make sure that it was able to handle the crisis.
Brussels will host a two-day summit of EU leader on Thursday and Friday. On their agenda will be solutions for improving the joint IMF/EU loan facility, which constitutes the EU’s main mechanism for temporary crisis resolution, as well as the ratification of a German-initiated change to the European Union treaty regarding the creation of a permanent crisis management system to be implemented in mid-2013.