Standard & Poor's affirms long-term rating on Basque Country at 'A'

Standard & Poor's Ratings Services affirmed on Tuesday its 'A' long-term issuer credit rating on the Autonomous Community of The Basque Country (Basque Country) with negative outlook.

According to the rating agency, the Basque Country is rated two notches above the long-term rating on Spain (BBB+/Negative/A-2) because they believe the region's credit characteristics would be more resilient than the sovereign's in a stress scenario.

In Standard & Poor's view, the Autonomous Community of the Basque Country benefits from a predictable institutional framework, and has an export-oriented economy that is more competitive than Spain's.

The Basque Country boasts high GDP per capita (134% of the Spanish average) and lower unemployment rates than Spain, at 13% compared with 24% nationally in first-quarter 2012.

The rating agency expects the region to take appropriate measures to return to operating surpluses and reduce its overall deficit over 2012-2014, in compliance with fiscal targets set by the Spanish government.

It also anticipates that the Basque Country will only moderately contain its spending, which contrasts with the expectation for the majority of Spanish regions, which will likely aggressively cut their costs.

Thanks to the Basque Country's strong operating surpluses posted before the 2009 recession, Standard & Poor's believe it can now take less painful cost-cutting measures to comply with the Spanish government's fiscal targets.