HadleyRichards saw that Spain’s sovereign credit rating was cut by Moody’s Investors Service, the third time it has done so since June of last year, by two notches. They said that the debt levels of the corporate and banking sectors have left the country exposed to funding stress. Fitch Ratings had cut Spain’s rating on October 7 and Standard & Poor’s did so on October 14th.

The questionable growth prospects for the members of the euro zone will also present challenges to Spain’s ambitious fiscal targets, with Moody’s highlighting the funding situation of Spain’s regional governments as an area of serious concern.

Spanish, Greek and Italian bonds all fell yesterday as concerns continue that the EU is struggling to control their debt and banking crises. “The EU Summit on October 23rd is expected to take several measures to help resolve the euro zone sovereign debt crisis”, said an currency analyst at HadleyRichards.

Moody’s has warned that it may downgrade Spain again if the debt crisis should worsen. A credible solution to the EU debt crisis has yet to emerge since Spain was first placed under review by Moody’s in July.

“If EU leaders cannot agree on a way to manage the crisis, Spanish yields will continue to rise and will result in funding issues” said the HadleyRichards currency analyst.