Credit agency Standard & Poor's has reduced cut Spain's long-term sovereign credit rating by one nick (to AA- from AA), citing the country’s weak growth and high levels of private sector debt.

S&P further noted that Spain’s high unemployment rate would continue to dampen the economy.

Despite signs of resilience in economic performance during 2011, we see heightened risks to Spain's growth prospects due to high unemployment, tighter financial conditions, the still high level of private sector debt, and the likely economic slowdown in Spain's main trading partners, S&P said in a statement.

The financial profile of the Spanish banking system will, in our opinion, weaken further.

The credit agency’s downgrade of Spain follows a similar cut by Fitch Ratings last week.

S&P also reduced its forecast for Spain’s GDP growth in 2012 to 1 percent from a previous estimate of 1.5 percent.

S&P warned of additional cuts in the event that the Spanish economy continues to deteriorate.

In response, the Spanish Treasury said: S&P underestimates the scope of the unprecedented structural reforms undertaken, which will obviously take time to bear fruit.

The Spanish government is facing intensifying resistance to its austerity program from a public outraged by higher taxes, job cuts and drastically reduced government spending.

A huge protest is expected in Madrid on Saturday.

Unemployment in Spain is estimated at an astounding 21 percent, the highest in the European Union. The public sector deficit reached a figure of 11.1 percent of GDP in 2009. High yields on government bonds would suggest that investors are skeptical that Spain will be able to cut that deficit down to the target of 6 percent of GDP this year.

A government official told the Financial Times on Friday that meeting the 6 percent figure would be “difficult.”

And if the [2011] deficit is above 6.5 percent, it's worrying, the official added.

Meanwhile, finance ministers of the G=20 are meeting on Friday in Paris to find a solution to the crippling Eurozone debt crisis.