Standard & Poor’s Corp. on Wednesday downgraded Spain’s long-term credit-rating by one notch, in a new sign of a deepening euro-zone sovereign debt crisis.

Spain become the third euro-zone nation to be hit with a S&P downgrade in just two days, following steeper cuts on Portugal and Greece. On Tuesday, S&P slashed its ratings on those nations, even junking Greece, amid concerns that nation’s policy options are narrowing because of weak economic growth prospects.

The ratings actions underscore mounting concerns that Greece could default on its debt and that European Union authorities are failing to halt contagion of its financial problems to other highly indebted euro-zone sovereigns. Spain, the euro zone’s fourth largest economy, is grappling with a double-digit budget deficit and faces years of weak growth following the collapse of a decade-long construction boom.

“Spain is the 800 pound gorilla in the room. Greece and Portugal are small countries, but Spain is about five times their size with regards gross domestic product,” Win Thin, senior currency strategist at Brown Brothers Harriman & Co, said in a note to investors.

The news of the Spanish downgrade sent equities in Spain broadly lower. S&P said it reflects a downward revision of its medium-term macroeconomic projections. Read the rest of this entry »