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Moody's Downgrades Spanish Banks

   by Selah Hennessy

    World stocks fell Friday, after the credit rating of more than a dozen
   Spanish banks was downgraded. The blow comes amid investor fears about
   the stability of the eurozone.
   Residents on the streets of Spain's capital, Madrid, seemed resigned to
   the downgrading. One resident said the measure should have happened a
   long time ago because the banks in Spain are not in a good position to
   secure deposits and accounts.
   But residents say Spain is on the right track to resolve its banking
   problems.
   Local resident Domingo Beltran says Spain has to clean up the banks and
   clean up the country. The measures the government is taking, he says,
   are designed to do just that.
   [1]Moody's Investors Service downgraded the credit rating of 16 Spanish
   banks late Thursday. It blamed the downgrade on Spain's renewed
   recession, unemployment and bad loans in the property industry.
   Iain Begg from the European Institute at the London School of Economics
   says the markets fear the banks may need rescuing by their government.
   "The risk for Spain as a country is that if there are too many toxic
   assets on the books of Spanish banks, then that can become a problem
   for the state in that the state would be expected to come to the rescue
   of the banking system in much the same way as it did in the United
   Kingdom and the U.S. after the Lehman Brothers episode," said Begg.
   But with finances already stretched in Madrid, it is not clear that the
   government can afford a major rescue. That could mean a problem for the
   wider eurozone.
   Some European nations like Greece that have been unable to meet their
   debts have been bailed out by their euro neighbors. In Greece, an
   election earlier this month turned out no clear winner and the country
   is set for a fresh vote next month. The favorite party to win the
   largest share of votes, a radical left group, wants to renegotiate the
   bailout deal made with the European Union and the International
   Monetary Fund, a position that could put Greece's place within the
   eurozone at risk.
   Begg says it is best for Greece and for Europe that the country stays
   within the single currency. But he says regardless, Europe is in the
   process of becoming a stronger rather than a weaker union.
   "Europe has been making rather than breaking for much of the last few
   months because it has been gradually putting in place all kinds of
   systems for governing the euro area more effectively than it has in the
   past and resolving some of the potential problems," said Begg.  "The
   trouble is that what it is designing is a system for normal times, and
   we are in abnormal times. The trick is to get through the abnormal
   times before the normal times can be restored."
   Unemployment in Spain is nearing 25 percent. Among the young, it is
   reaching around 50 percent.
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   [2]http://www.voanews.com/content/moodys-downgrades-spainish-banks/6964
   34.html

References

   1. http://www.moodys.com/
   2. http://www.voanews.com/content/moodys-downgrades-spainish-banks/696434.html