A wealthy, relatively diversified economy with a stable political system. Ongoing structural reform and restoration of public finance discipline. Fiscal flexibility underpinned by moderate, albeit rising, net general government debt. Weak economic growth prospects due to ongoing private-sector deleveraging. High unemployment and labor market rigidities, which we expect will be addressed via ongoing reforms. Significant net external debt level, implying vulnerability to a deterioration in external financing conditions. The lowering of Spain's long-term rating reflects our view of: Spain's uncertain growth prospects in light of the private sector's need to access fresh external financing to roll over high levels of external debt amid rising funding costs and a challenging external environment; The likelihood of a continuing deterioration in financial system
