Rating agencies have kept Spain among the laggards for more than a year, on the verge of “junk status”. Nonetheless, markets have slightly improved the 10-year bond price from 7% of mid 2012 to 4.2% of last week. Now, the risk of a bailout has vanished and the thesis of the euro breakdown has run out of steam. Without all these uncertainties, the Spanish rating is overly pessimist. Moreover, most uncertainties about South European countries dissolve with the stability of the Italian government.
The International Monetary Fund (IMF) will publish its forecast of economic growth for the partner countries in the next few days. It is likely that their prospects about Spain will change for the better -compared to last summer (-1.6% for 2013 and 0% for 2014). An improvement in the IMF forecasts may win over both rating agencies and market watchers, who might review their own previsions and even improve their ratings. It makes sense to hope for such a positive step, and the Spanish government should lobby towards that.
Spanish Minister of Economy Luis de Guindos is traveling to New York and Washington under the pretext of the IMF Meeting, and there he will meet some investors and rating agencies with plenty of arguments to convince them so as to change their perspectives. To sell the so-called “Marca España” (Spain Brand) the government must try to raise one notch the Spanish rating so the inner message about the improvement and recovery of Spain would be reinforced. After all, that is precisely the government’s main assertion to improve their vote expectations.
Macroeconomic data are ambiguous, and the negative ones are usually the most easily spread. However, an improvement of the Spanish rating is possible. It is only necessary an effective economic diplomacy of reputation.
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