Paris - Moody's rating agency said on Wednesday it could cut Spain's credit rating again because of the country's heavy refinancing schedule and problems in meeting its borrowing needs next year.
Moody's cut Spain's sovereign debt rating from Aaa to Aa1 in September, adding to the pressures on Madrid and the wider eurozone, and said Wednesday that it could now further reduce the rating.
It said in a statement that Spain's solvency was not in question and it would not need external help but heavy financing requirements would likely create fresh tensions on the money markets.
Additionally, it cited the possibility that higher costs to recapitalise the banking system could increase the public debt and noted concerns over whether the central government can push through reforms given the high degree of autonomy enjoyed by the regions.
"Moody's believes that the ... downside risks warrant putting Spain's rating under review for downgrade," top Spain analyst Kathrin Muehlbronner said in a statement.
"However, Moody's also wants to stress that it continues to view Spain as a much stronger credit than other stressed eurozone countries ... Moody's review will therefore most likely conclude that Spain's rating will remain in the Aa range."
Moody's estimated that the central government needs to raise some €170bn in 2011, with the regions needing another €30bn and the banks €90bn.
Raising this money is "now rendered more challenging by the fragile confidence of international capital markets," it said, noting recent speculation that Spain might have to seek help from the European Union and International Monetary Fund.
Debt-stricken Greece got a €110bn EU-IMF rescue in May when the markets turned against it, meaning it could no longer raise fresh funds at sustainable rates and was faced with the prospect of default.
Ireland was bailed out similarly earlier this month, with Portugal tipped as the next eurozone casualty on a list including Spain and possibly Italy as the eurozone debt and deficit crisis spreads.
Moody's said it expected Spain to be "able to raise the necessary financing.
"However, ongoing higher funding costs would strain Spain's debt affordability further beyond current expectations and could also negatively impact the availability and cost of credit to the wider economy, which remains vulnerable."
Moody's said its review of Spain's rating "will focus on the central government's ongoing commitment to address the key structural challenges of the Spanish economy."
At the same time, it will keep in focus "any broader developments in the eurozone, in particular with regard to the design of the envisaged permanent crisis mechanism."
EU leaders hold a key summit meeting on Thursday and Friday when proposals for such a permanent rescue mechanism will top the agenda.
After the Greek bailout in May, the EU and IMF put together a three-year €750bn package but opinions on how a successor programme should work are sharply divided.