A wealthy, relatively diverse economy with a stable political system. Implementation of a comprehensive structural reform agenda and restoration of public finance discipline. Ongoing rebalancing of the Spanish economy toward external demand. Weak economic growth prospects due to protracted private-sector deleveraging. High unemployment and labor market rigidities, though these are being addressed via labor market reforms. Significant net external debt, implying vulnerability to a deterioration in external financing conditions. The downgrade of Spain reflects our view of mounting risks to Spain's net general government debt as a share of GDP in light of the contracting economy, in particular due to: The deterioration in the budget deficit trajectory for 2011-2015, in contrast with our previous projections, and The increasing likelihood that
