News

Europe''s debt crisis flared again Wednesday as Spain saw its credit rating lowered, just as Germany sought to reassure markets fearful over a possible Greek financial collapse by saying its share of a key aid package could be approved in the next few days.

Stock and bond markets had begun to regain their composure caused by stinging downgrades of Greece and Portugal the day before when the Standard &' || 'amp; Poors ratings agency delivered more bad news by cutting Spain''s rating to AA from AA+.

The agency said Spain''s growth prospects were weak after the collapse of a credit-fuelled housing and construction bubble. The downgrade raises the ominous prospect of market contagion hitting another countrys'' finances.

Spain''s economy is much larger than that of Greece or Portugal and many think it''s simply too big to bail out if it gets into serious trouble, as Greece has, by facing unsustainable costs to borrow money on bond markets.

"We now believe that the Spanish economy''s shift away from credit-fuelled economic growth is likely to result in a more protracted period of sluggish activity than we previously assumed," Standard &' || 'amp; Poor''s credit analyst Marko Mrsnik said.