The deepening economic recession is limiting the Spanish government's policy options. Rising unemployment and spending constraints are likely to intensify social discontent and contribute to friction between Spain's central and regional governments. Doubts over some eurozone governments' commitment to mutualizing the costs of Spain's bank recapitalization are, in our view, a destabilizing factor for the country's credit outlook. We are therefore lowering our long- and short-term sovereign credit ratings on Spain to 'BBB-/A-3' from 'BBB+/A-2'. The negative outlook on the long-term rating reflects our view of the significant risks to Spain's economic growth and budgetary performance, and the lack of a clear direction in eurozone policy. On Oct. 10, 2012, Standard&Poor's Ratings Services lowered its long-term sovereign credit
