Spain Faces Uphill Battle to Resolve Crisis: Standard & Poor’s

Spain's credit rating downgrade was necessary because of a deepening recession and the uphill battle the country faces in pushing through an unpopular reform program, Moritz Kraemar, managing director for European Sovereign Ratings at Standard & Poor's told CNBC Thursday.

Spain Faces Uphill Battle to Resolve Crisis: Standard & Poor’s
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"Politically and socially the reform agenda is very difficult. This recession could keep unemployment up and intensify the social discontent and friction between Madrid and the regional governments," he said.

S&P cut Spain's credit rating to just one notch above junk late or BBB-minus on Wednesday with a negative outlook — the third cut this year — as the embattled country tries to fight off growing calls for a bailout . Spain expressed surprise at the downgrade claiming it was "unhelpful."

The cut could raise Spanish borrowing costs, which have fallen in recent weeks since the European Central Bank announced its bond-buying program.

Kraemar was critical of the response by euro zone policymakers questioning the group's commitment to solving some of the difficult questions.

Some Northern European countries have opposed the recapitalization of Spanish banks via Europe's new bailout fund. Kraemer questioned the commitment of European policymakers and said the threat could jeopardize bank recapitalization in Spain.

"In principal we had thought that the main plans were in place for a turnaround including the ECB's Outright Monetary Transactions program. These need to be put into place and become effective. We have yet to see them enacted, " he added.

S&P forecasts a recession of 1.5 percent for Spain in 2013, adding that the "growth prospects look fairly dim" for the country.

—By CNBC's Shai Ahmed