Spain gets another warning from S&P

Credit ratings agency Standard & Poor’s warned Spain Friday that its weak economic growth prospects could undermine its plan to rein in its budget deficit, making a debt downgrade even more likely.

Though short of the levels being posted in Greece, investors are increasingly worried about Spain’s budget deficit — and skeptical about the government’s ability to push through sharp cutbacks to right the situation.

The government has announced both tax rises and spending cuts — not all yet specified — to reduce its deficit back towards the 3 percent limit that euro rules prescribe.

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In a statement, S&P said Spain’s deficit would likely remain above 5 percent of the country’s gross domestic product through to 2013 against the government forecast of 3 percent, and that as a result the debt burden could rise to above 80 percent of GDP by 2012. [Read the full article]

Britain’s rise from recession was stronger than previously thought, giving Prime Minister Gordon Brown’s governing Labour Party a boost as it moves toward a national election.

Friday’s revision of growth in the final quarter of 2009 to 0.3 percent from an initial estimate of 0.1 percent assuaged fears that the country hadn’t exited from its recession, but economists warned the improvement remains shaky.

Third quarter gross domestic product was revised downward to a 0.3 percent fall from a 0.2 percent decline, and measures that had boosted the final quarter’s figure, such as a break on sales tax and a car scrappage program, ended at the start of this year. [Read the full article]

Fitch Ratings takes the following rating action on Norton, Ohio’s limited tax general obligation (GO) bonds as part of its continuous surveillance effort:

–Approximately $2.1 million limited tax GO bonds, series 2003, downgraded to ‘A-‘ from ‘A’.

–The downgrade to ‘A-‘ reflects decreases in the city’s financial flexibility evidenced by reduced income tax receipts and reserve levels as a result of sustained retrenchment of the local automotive industry.

–The Outlook revision to Stable from Negative reflects sound management practices and adequate reserve levels.

–A limited local economy with high concentration in the auto industry is reflected in sustained regional employment losses and above-average regional unemployment levels.

–Debt levels are expected to remain low, as the city has manageable future capital needs. [Read the full article]

Days after the Federal Reserve seemed to sound the alarm that the era of near-zero interest rates is ending, Chairman Ben Bernanke tempered those expectations a bit this week. Just because the Fed boosted the rate it charges banks, he told Congress, doesn’t mean it will move any time soon to boost broader interest rates too.

Nonetheless, it behooves investors to be ready, regardless whether rate hikes come in the second half of 2010 or not until next year.

It’s an endorsement of the economy’s potential to soon stand on its own without the help of emergency rates. It means yields from CDs as well as savings and money-market accounts at banks won’t be minuscule much longer. It could even bode well for certain types of stocks.

But higher interest rates are bad for bonds and may make some other holdings less appealing too, especially once inflation starts rising. [Read the full article]

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