Spain's debt has been downgraded by one notch to Aa2 by ratings agency Moody's.
It raised concerns over the Spanish government's ability to improve its finances against a backdrop of "moderate" economic growth.
The cost of bank restructuring could "considerably exceed" current government projections, Moody's said.
Spain, which has the highest rate of unemployment in the eurozone at about 20%, is seen as one the region's weaker economies.
Its economy expanded by 0.2% in the fourth quarter last year, but contracted by 0.1% over the whole of 2010, according to official estimates from the National Statistics Institute. BBC News
