The current political weakness of the Government that prevents it from approving budgets, reforms or even validating decrees is a clear burden for the Spanish economy, according to all the rating agencies that examine Spain and therefore limit its rating improvements.
The last exam occurred last Friday night and was relevant in case there was good news. Debt markets are in tension and governments have to offer more interest to be able to place their bonds, so countries that achieve rating improvements receive relief to navigate an increasingly rough sea.
Three agencies reviewed Spain's rating, but the two most important, Standard&Poor's and Fitch, decided not to make changes, while the smallest, the European Scope, fortunately opted for a grade improvement. It moves Spain from A to A+, which is equivalent to a notable low already previously granted to Malta, Bulgaria or Slovenia.
Normally governments do not comment on changes in small agencies and focus on those of the three leaders Moody's, S&P and Fitch, but the first vice president, Carlos Body, immediately made public Scope's decision, which he took as "a sample of the strength and modernization of the Spanish economy."
However, that same night, S&P and Fitch decided to do the same as Moody's, which already declined last July to raise Spain's rating. All three also keep it at a remarkably low level (A+, A and A3, respectively) which is better than two years ago, but far from the triple A of the past. Why, if, as the Ministry of Economy assured on Friday night, "Spain leads growth among the main partners of the euro zone thanks to an economic policy of the Government very different from the previous stage"?
Fitch already warned in its last review on March 13 that it would only improve the rating if "there is a reduction in the political blockade that improves the Government's ability to approve and execute a credible fiscal policy strategy and other reforms." S&P also warned in its last review last year that “Spain's political blockade slows down the momentum of public policies. “No budget has been passed since 2023, resulting in modest fiscal tightening despite strong economic growth.” "Instead, the political impulse has focused on concessions to regional parties, such as the amnesty law for Catalan secessionist leaders and the forgiveness of regional debt, in order to maintain support for the government coalition," he added in a harsh diagnosis of what Pedro Sánchez prioritizes.
As for the aforementioned Moody's last July, it maintained the rating at A3 because, among other factors, "political fragmentation has caused a significant increase in the use of decrees that emanate directly from the executive branch and has generated political uncertainty that could be slowing investment."
Even Scope, the only one that has improved its score in the last year, emphasizes that "Spain's high parliamentary fragmentation and the weakness of the minority Government translate into a high level of political uncertainty, which hampers the reformist drive and the Government's ability to respond quickly to economic disturbances. "The current migration crisis in Ceuta is further weakening the Government's position." He is not betting on the approval of Budgets for 2027.
Sánchez can boast that Spain's risk premium is better than that of France, due to the higher deficit and debt that the outgoing Emmanuel Macron is carrying on the eve of the dangerous presidential elections of 2027. Greece and Portugal are also worse. But there is a counterpoint and that is that Portugal has just achieved the milestone of overtaking Spain in solvency rating for the first time in the century in Fitch as a reward for its best management of public accounts. Its risk premium is systematically better than its neighbor.
Does this matter? More and more, because the markets are beginning to take more and more seriously whether States are going to be able to repay debt in a scenario of more inflation and military spending. US Treasury Secretary Scott Bessent is failing to stem the rise in bond prices and in Europe, German bunds have reached their highest level since 2011, while French bunds are at their highest since 2008.
