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		</div><p><a href="http://londonglossy.com/wp-content/uploads/2010/12/agency-warns-on-spain-credit-rating.jpg"><img class="alignnone size-full" title="The eurozone debt crisis has reared its head as a key agency warned it may downgrade Spain's credit rating" src="http://londonglossy.com/wp-content/uploads/2010/12/min-agency-warns-on-spain-credit-rating.jpg" alt="The eurozone debt crisis has reared its head as a key agency warned it may downgrade Spain's credit rating"/></a></p>
<p>The escalating debt crisis in the eurozone has come under sharp focus once again as a key agency warned it may downgrade Spain&#8217;s credit rating.</p>
<p>The country&#8217;s mounting debt, financing needs and a lack of faith in its government&#8217;s ability to tackle the issues prompted Moody&#8217;s Investors Service to place the Aa1 rating &#8211; only just downgraded from AAA in September &#8211; on review.</p>
<p>The euro fell against most major currencies amid fears that Spain will be forced to follow in the footsteps of Greece and Ireland and accept a multibillion-pound bailout from the European Union and International Monetary Fund.</p>
<p>But despite problems in the property and banking sectors, the Spanish government has denied it will need any financial assistance.</p>
<p>Economists, most recently including deputy governor at the Bank of England Charles Bean, have raised concerns over the threats sovereign-debt woes in Europe pose to the UK economy. </p>
<p>A weakened eurozone could hit the UK&#8217;s export trade &#8211; seen as key to a healthy economic recovery.</p>
<p>Moody&#8217;s report spooked the London stock market, with the banking sector leading the FTSE 100 Index lower. Barclays, which is seen as being one of the most exposed to Spain&#8217;s economy, fell 3% at the top of the fallers&#8217; board.</p>
<p>Spain is struggling to emerge from nearly two years of recession and has the highest unemployment rate in the eurozone and a swollen budget deficit. The Spanish government will need to raise around 170 billion euros (£143 billion) in 2011, while Spanish banks have about 90 billion euros (£76 billion) worth of debt to refinance, Moody&#8217;s said.</p>
<p>Kathrin Muehlbronner, lead analyst for Spain at Moody&#8217;s, said the country was vulnerable but did not expect its government to ask for a bail-out. Ms Muehlbronner said: &#8220;Moody&#8217;s wants to stress that it continues to view Spain as a much stronger credit than other stressed eurozone countries.&#8221;</p>
<p>But she added: &#8220;However, Spain&#8217;s substantial funding requirements, not only for the sovereign but also for the regional governments and the banks, make the country susceptible to further episodes of funding stress.&#8221;</p>
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