US ratings agency Moody's decided last week to maintain its credit rating for Spain above 'junk' level; however, five regions in the country have not fared the same luck.

The five regions, Andalucia (from 'Baa3' to 'Ba2'), Extremadura (from 'Baa3' to 'Ba1'), Castilla-La Mancha (from 'Ba2' to 'Ba3'), Catalonia (from 'Ba1' to 'Ba3'), and Murcia (from 'Ba1' to 'Ba3') were downgraded by one or two notches each and taken to non-investment grade.

All five are among the regions that requested a bailout from the central government. They have been kept at a negative outlook for another potential downgrade.

Moody's has kept its rating unchanged for Basque Country at 'Baa2', Madrid, Castilla y Leon, and Galicia at 'Baa3', and Valencia at 'B1'.

Moody's has attributed the rating cuts for Andaluca, Castilla La Mancha, Catalonia, and Murcia to the lack of liquidity, high debt levels, and elevated uncertainty over the ability to correct fiscal imbalances.

Spain's regional bailout fund reduces liquidity risk but does not help resolve the fundamental problems,rating agency explains The same argument was made for Extremadura, but in this case Moody's acknowledged savings measures implemented to reduce the deficit.

MG

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