The Euro-zone is facing yet another credit crisis as Spain's credit was downgraded by Standard and Poor's, this time by 2 levels. Spanish Foreign Minister Jose Manuel Garcia-Margallo said, "The figures are terrible for everyone and terrible for the government ... Spain is in a crisis of huge proportions."
The new downgrade re-stoked fears about Italy, who was selling bonds at an auction to finance its debt, by raising fears Italy would also run out of options as the many wondered how long bond sales would be seen as sustainable. This forced Italy to sell bonds at higher rates than originally expected.
Citing high risk levels of consumer loans with spanish banks, Standard and Poor's lowered the credit rating of the country sparking new fears that the Euro-zone is still in trouble.
Opposite of Spain, Germany's bond rate was selling at much lower rates, and the difference between the two nations was at 420 points.
Spain's economy is expected to shrink between 1.2% and 1.4% this year.
Standard and Poor's also said it does not appear Spain can cut its spending deep enough to make deficit reduction meaningful.