File photo shows a euro coin with the Spanish national flag in the background.
Spain’s 10-year borrowing costs have hit a eurozone-era record high of about seven percent after Moody’s rating agency downgraded the country’s credit rating.
The interest rate for Spain’s benchmark 10-year bonds rose to a record 6.92 percent early Thursday which means that Madrid has to pay investors much higher rates of return.
The new figures are of great importance as other countries including Portugal and Ireland were forced to ask for bailouts after yields on their bonds approached seven percent.
Moody’s Investors Service downgraded the credit rating of Spain on Wednesday from A3 to Baa3, which is the lowest level of "investment grade" or just above "speculative" or "junk" grade.
The move came a few days after the eurozone finance ministers agreed to lend 100 billion euros to Madrid to save its teetering banks.
Moody's said the borrowing "will materially worsen the government's debt position."
Fitch ratings also downgraded 18 Spanish banks on Tuesday, less than a week after the agency cut the country’s sovereign debt rating.
Battered by the global financial downturn, the Spanish economy collapsed into recession in the second half of 2008, taking with it millions of jobs.
Many economists believe Spain's economy will enter into a new recession in the first two quarters of 2012.