Spanish government appealed for calm from investors

The Spanish government appealed for calm from investors on Wednesday following a downgrade in its credit rating, a day after similar downgrades for Greece and Portugal sent shockwaves through the markets.
S&P said it was lowering Spain's long-term sovereign credit rating by one notch to "AA" from "AA+" because the country was "likely to have an extended period of subdued economic growth, which weakens its budgetary position."
The agency also said its outlook for Spain was negative and the country could face another downgrade in a statement that sent the euro plunging to a one-year low against the dollar and European stock markets tumbling.
Markets are especially sensitive to Spain's fiscal situation because of the size of its economy, which is Europe's fifth largest. European banks also have far greater exposure to Spanish debt than to Greek or Portuguese debt.
S&P downgraded Greece's bonds to junk status on Tuesday and cut Portugal's long-term credit rating by two notches, causing the markets to plunge on fears that the debt debacle in Athens was spreading to other eurozone countries.
"The downgrade of Spanish government debt by S&P is another alarming sign that the effects of the Greek crisis are spreading," said Ben May, European economist at London-based market research firm Capital Economics.
Phil McHugh, a dealer at forex trading company Currencies Direct, said the contagion from the Greek financial crisis would likely spread to other nations on the fringe of the euro zone that are also burdened by big deficits.
"We could now see this contagion filtering through to Ireland and Italy" after Portugal, Greece and Spain, he said.
Spain's Deputy Prime Minister Maria Teresa de la Vega said the government was taking the measures needed to bring the public deficit down from 11.2 percent of gross domestic product to within a 3.0-percent limit set for the 16 nations that use the euro by 2013.
"We are adopting all the measures needed to meet our commitments," she told reporters in parliament shortly after S&P Spain's credit rating.