Moody's downgraded Spain's credit rating on Thursday, citing worries over the cost of the banking sector's restructuring, the government's ability to achieve its borrowing reduction targets and grim economic growth prospects.
The central bank said the euro15.5 billion figure is subject to change, depending on how banks go about raising capital as required by the government. Spain's main stock index sank after the Moody's report to close down 1.2 percent, and the yield on Spain's ten-year bonds rose 0.01 percentage point to 5.50 percent.
The downgrades have come amid signs that Europe's debt crisis is flaring up again ahead of the March 24-25 summit of EU leaders in Brussels. Portugal's cost to borrow 10-year bonds stands near a euro-era record. Though a "comprehensive solution" to the debt crisis has been trumpeted, there are growing fears that the 17 countries that use the euro will not agree a revamped bailout mechanism, set new rules on budget deficits and a system of support funds to flow from richer countries in the single currency bloc to the poorest.
Moody's had put Spain on notice for a downgrade in December. Pylas reported from London. Daniel Woolls and Barry Hatton contributed to this report from Madrid and Lisbon.
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