Spain’s long-term government debt rating is stable for now, says ratings firm S&P, so long as the government doesn’t increase the country’s bank bailout, reports the Wall Street Journal.
Struggling Bankia—the country’s third largest lender—was rescued in late May, with an infusion of $23.78 billion, or €19 billion. And while Prime Minister Mariano Rajoy said the bailout was done to strengthen the financial sector, it hit Spanish bonds hard and caused them to jump up 0.15%.
Read: Spain bailing out its bank
If no further measures are required, S&P plans to keep the country’s rating at BBB+, which is three notches above junk.
The agency isn’t making any promises, though. It’ll be watching for the September external audit results of the country’s banking system before making any final calls.
And the country is far from being in the clear; unemployment has risen steadily over the past few months—hitting a 35-year high of more than 24%—and the majority of its banks reported plunging profits this past quarter, including Bankia, says the BBC.
In March, Spanish officials slashed €27 billion in spending, and announced an upcoming rise in corporate tax rates. Deputy Prime Minister Soraya Sáenz de Santamaría told the press, “The government is stuck between a rock and a hard place. People say they can’t take any more austerity cuts, but international lenders who buy bonds say we have to, or we won’t be able to borrow anymore.”
Following the cuts, people took to the streets, with thousands holding protest marches and demonstrations turning violent in Barcelona.
Like Greece, Spain is at the centre of the Eurozone crisis and will face an uphill battle during its recovery. And while its outlook is poor, Reuters reports that S&P says it could be revised, “If the government is successful in reining in its public finances and if a Eurozone support program was implemented.”
Read: Moody’s lowers German outlook
The agency predicts Spain’s debt-to-GDP ratio will remain below 80% beyond 2015, and is looking forward to the outcome of tomorrow’s ECB monthly meeting.