SPAIN has had its credit rating downgraded amid warnings that the recession is likely to deepen by the end of the year.
Standard & Poor’s lowered its rating two notches from A to BBB+ in a move that is expected to drive up the cost of borrowing.
The rating agency has already downgraded Spain once this year and warned that it may be forced to lower its rating further if the situation fails to improve.
Investors are becoming increasingly worried over the Spanish government’s ability to cut spending without sending the economy further into recession.
Spain is now viewed as the most vulnerable country in the eurozone, and is looking ever more likely to have to accept a multi-billion-euro bailout.
It comes as the Spanish central bank confirmed this week that Spain is in recession for the second time in three years.
There was further bad news as it was announced Spanish unemployment has hit a record high, according to official figures.
The unemployment rate hit 24.4 per cent at the end of March, with 5,639,500 people out of work.
Foreign Minister Jose Manuel Garcia-Margallo said: “The figures are terrible for everyone and terrible for the government. Spain is in a crisis of huge proportions.”