With a few years delay the credit rating of Spain was lowered by a 2 steps at once. So now it is BBB, according to the latest calculation of S&P that has shaken the markets for a while. But BBB is still an investment grade, while the situation in Spain is far away from stability and growth.

Calculated with my formula the credit rating of Spain is BB. That is a speculative grade and much more responds to the real situation in this country. So it is a very right move from S&P to lower Spain from the funny looking A-grade that was before. But obviously S&P is still serving to political correctness and is still evaluating some countries much higher than is their real credibility.

At the moment with this BBB grade, Spain is equal to Russia, based on S&P ratings. But Russia has a tiny government debt, enormous cash reserves, much more stable government and a large foreign trade surplus. Russia also is a serious contributor of new money for IMF that is intended to be used exactly for saving deeply indebted countries like Spain. So it is paradoxical for S&P to place so different countries at equal position.

In fact Spain is much worse than Russia. As we can see from the calculation with Dobri's formula, Russia is an AA economy. And this is much better than Spain with its BB, according to same formula. 

I think old credit ratings agencies have much evolution to pass, before returning to real life and issuing ratings with real value. The impressive late and not full re-valuation of Spain is a sign how credible are other higher ratings of deeply indebted governments...

Dobri
April 27th 2012