S&P cuts Navarre, Basque Country to 'BBB+'

Ratings agency Standard & Poor's (S&P) on Wednesday downgraded its credit ratings on seven Spanish autonomous regions to 'BBB+' from 'A' including the Basque Country and Navarre as well as on the County Council of Bizkaia (short-term rating to 'A-2' from 'A-1') as a consequence of the negative outlook on the long-term rating on Spain.

The agency said it took the actions because a regional government can be rated just up to two notches above its investment-grade sovereign.

Last week, Standard & Poor's downgraded its rating on Spain's debt by two notches, leaving it on the cusp of junk status. A grinding recession, high unemployment and social unrest are limiting the government's options for stemming the country's financial crisis, S&P said.

Despite the cut, the long-term ratings on Navarre and the Basque Country remain two notches above the long-term rating on Spain, based on the S&P view of the LRGs' higher creditworthiness.

Specifically, S&P consider that the credit profiles of the Basque Country and Navarre are supported by, among other factors, their unique institutional framework, high fiscal autonomy, and highly export-oriented economies that we consider structurally stronger and more resilient than Spain's.