Bank bailout intensifies Spain's crisis

US rating agency Moody's has lowered Spain's credit rating by three notches on Wednesday evening, leaving it barely above junk status. It also warned that a further downgrade may be imminent. The liberal-conservative Neue Zürcher Zeitung is not surprised at the move: "That Spain's financing difficulties have increased once more is not simply a result of the general uncertainty but above all the manner in which the bailout is taking place. The EU billions were supposed to free Spain of its enormous bank problem. However at present the EU has no instrument at its disposal for a direct recapitalisation of the banks. This has meant that the ties between the state and the banks remain intact. In fact Spain has actually become even more closely entwined with its banking sector. The financial aid is flowing to the weak institutions, while the state guarantees the loans."

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