Standard and Poor's downgraded Spain's credit rating by one notch to AA-, the fourth highest investment level according to S&P, with negative outlook on sluggish growth and high risks to financial institutions due to possible default to the euro area's fourth largest economy.

S&P clarified that despite signs of resilience in economic performance during 2011, we see heightened risks to Spain's growth prospects, and the financial profile of the Spanish banking system will, in our opinion, weaken further, with the stock of problematic assets rising further.

Spain received a similar cut by Fitch on October 7 to increase worries in markets amid efforts from European leaders to launch measures to contain the debt crisis.