Moody’s plays down Spain bailout expectations

When the current crisis ebbs away in defeat, analysts and commentators–particularly those in Spain–will be left with an inestimable skill in their hands: finding silver lines where doom and gloom reign. It is no small achievement being able to focus over the little bright spots when much of what we hear about the eurozone and its periphery sounds discouraging: for instance, at Ahorro Corporación Financera in Madrid, experts said Wednesday in a note to investors that Spanish industrial sentiment and order books had improved, even if figures are -15.9 and -35.8 now.

To be sure, they have. Although industrial output fell in February by -6.5 percent versus expectations of -4.9 percent, the industrial confidence index is +2 points more positive in March 2013 than it was the last quarter of 2012, and orders have risen by +6.2 points. “These data could lead us to think that industrial production will heal and show better numbers soon,” ACF explained.

This week, the costs of ensuring Spanish government debt eased, too, although by a tight margin. Risk agency Moody’s analysts said in an interview that the probabilities of Spain asking for a rescue are less pressing than previously thought. And the stock market index Ibex, Afi reported today, seems to have reached stability above past minimum levels. Luis de Guindos, minister for the Economy, said that GDP during the first quarter of this year lost up to -0.6 percent, more than BBVA researchers forecast (-0.3 percent) yet at least 0.2 percent better off than in the last three months of 2012.

But Moody’s said something else: the constant deviations from budget targets and reviews over deficit figures have weakened the credibility of the government of prime minister Mariano Rajoy to manage Spain’s public finances. The negative outlook and investment grade of Baa3 remains unchanged.

Some national politicians have proved to pose a higher threat to their countries’ chances of recovery than the actual consequences of a global credit freeze and economic downturn. Perhaps we shouldn’t pay so much attention to what they say, but to the real trends in the economy. Green shoots can be more telling than party politics deficiencies.