Last week rating agency Standard & Poor’s downgraded Spain’s credit rating highlighting a deepening recession and mounting pressure on Madrid's finances as major factors behind this decision. S&P cut Spanish debt from BBB+ to BBB-, one level above junk status, and warned of possible further downgrades.
The problems in Spain continue to place further strain on the eurozone and the future of the Euro remains in doubt as no viable solutions have been forthcoming from Brussels. Former Italian Prime Minister, Silvio Berlusconi hit the headlines this week stating that Germany should leave the Euro in order to enable other countries in the single currency to improve their competitiveness.
The future for the Euro looks grim. It is highly likely that the Euro is due a major devaluation despite Mario Draghi’s promise of unlimited QE. Either Spain or Greece will default and crash out of the Euro or Germany will be forced to leave. Either way, the value of the Euro is expected to decline. The current exchange rate of the Euro to the Pound is 1.24.