Spain's debt rating has been cut to one level above junk by Standard & Poor's, which cited mounting economic and political risks as the government considers a second bailout. The country was lowered two levels to BBB-minus from BBB-plus, S&P said yesterday. The US rating agency also assigned a negative outlook to the nation's long-term rating and lowered the short-term sovereign level to A-3 from A-2. "The negative outlook on the long-term rating reflects our view of the significant risks to Spain's economic growth and budgetary performance, and the lack of a clear direction in euro-zone policy," S&P said. "The deepening economic recession is limiting the Spanish government's policy options." The downgrade comes after Spain announced a fifth austerity package in less than a year and published details of stress tests of its banks. Creditworthiness concerns have grown since the government requested as much as €100 billion (HK$999 billion) in European Union aid to shore up its lenders and amid signals that the deficit target is in jeopardy. Investors are shunning the nation's securities as Prime Minister Mariano Rajoy considers a second bailout as a recession deepens. Rajoy has held off on a decision about whether to request European Central Bank and EU bond-buying to lower borrowing costs, seeking more details of what would be demanded of Spain in return for the support. Under the weight of internal nations' problems, the euro weakened against most of its major counterparts after Spain's debt rating cut. . "I can see further weakness to the euro from here," said Imre Speizer, a strategist in Auckland at Westpac, Australia's second-largest lender. "If the fiscal outlook is much worse in Spain, it could fall to junk status." The yield on Spain's 10-year benchmark bond closed at 5.8 per cent yesterday, compared with a record of 7.75 per cent on July 25, a day after Spain signed a memorandum of understanding awarding it a credit line for its banks. The IMF's managing director, Christine Lagarde, said yesterday the fund did not need to lend money to Spain to help the country tackle its fiscal crisis "Some people say unless you have skin in the game, meaning money, you are not really respected, you are not heard," Lagarde said. "I am not so focused on that as I am on the monitoring. I think we would rather act in our framework, use one of the tools that is frequently used, but as I said we can be flexible."