Political uncertainty prevents Spanish sovereign debt rating from upgrading: Moody's

Political uncertainty in Spain, where political parties have so far failed to form a government, is preventing the country's sovereign debt rating from being upgraded, according to the ratings agency Moody's.

The economics newspaper Expansion reported on Wednesday that political uncertainty in Spain was putting in jeopardy all the reforms that the current acting government had carried out over the last years.

The associate managing director at Moody's sovereign risk unit, Dietmar Hornung, said the political uncertainty was slowing down the reforms in Spain, especially those related to the labor market, what he called a very "complex and difficult" issue.

He stated the reforms had a limited and "less than expected" impact on the country's growth rate. The agency believed that the fiscal situation will progress, but only more reforms would make the ratings improve.

Meanwhile, Moody's analyst Maria Cabanyes said political uncertainty was always a "negative aspect" when it came to taking decisions on investment and expenses.

Moody's highlighted that Spain had improved in some issues such as the labor market, financial system, health system and pensions. The challenges the country had to face were public administration efficiency, fiscal reform and the liberalization of goods and services markets. Endit