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Spain downgraded by Moody's

The rating agency Moody's is cutting the Spanish government's credit rating, a direct result of the rescue package lined up by European leaders over the weekend.
Riot police stand guard in front of a bank branch during a protest against foreclosures in Madrid in May. Spain has been offered $125 billion in aid for its troubled banking system. (Alberto Di Lolli/Associated Press)

The rating agency Moody's is cutting the Spanish government's credit rating, a direct result of the rescue package lined up by European leaders over the weekend.   

Moody's lowered Spain's grade from A3 to Baa3, in an announcement made late Wednesday. That's still investment grade on Moody's scale, but it's just one notch above a junk rating.   

The downgrade comes after European leaders announced a €100 billion ($129 billion Cdn) loan to Spain on Sunday.

The loan is meant to help Spain shore up its hobbled banking system. But it will also increase the government's debt burden, Moody's said. That higher debt burden has pushed borrowing costs up to record highs this week.   

Moody's said it put Spain on review for another possible downgrade in the coming months.