Europe’s debt crisis mushroomed Wednesday as Spain saw its credit rating lowered, just as Germany sought to reassure nervous investors that Greece would not be allowed to go under, saying Berlin’s share of a key aid package could be approved in the next few days.
Stock and bond markets had begun to regain their composure after stinging downgrades of Greece and Portugal the day before, when Standard & Poors delivered more bad news by cutting Spain’s rating to AA from AA+ amid concerns about the country’s growth prospects following the collapse of a construction bubble.
“We now believe that the Spanish economy’s shift away from credit-fuelled economic growth is likely to result in a more protracted period of sluggish activity than we previously assumed,” Standard & Poor’s credit analyst Marko Mrsnik said.
Spain is considered the key to whether Europe’s debt crisis can be resolved — its economy is much larger than that of Greece and Portugal and — many in the markets postulate — may be just too big to bail out if it gets into serious trouble.
May just be “too big to bail out”? Yikes.