Catalonia’s credit rating was cut to junk by Standard & Poor’s after Spain’s most indebted region said it will need to tap a national rescue fund.
S&P lowered Catalonia, the largest of Spain’s 17 autonomous regions, by two grades to BB from BBB- with a negative outlook, the rating company said today in a statement.
The Spanish region of Murcia this week became the third to say it will need emergency loans, and Valencia signaled it needs funds to cover current and past overspending, adding fiscal pressure on Prime Minister Mariano Rajoy. Catalonia will seek 5 billion euros ($6.3 billion), almost a third of the 18 billion- euro fund announced in July by the government after being locked out of financial markets.
The country’s 17 semi-autonomous regions risk overwhelming a plan to tackle the euro area’s third-biggest budget deficit as Rajoy bails them out for a fourth time this year. The regions were responsible last year for most of Spain’s overspending and control more than a third of public spending, are increasingly being shunned by investors, mirroring the dynamic of the euro- region debt crisis.
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