Standard & Poor's (S&P) has cut Spain's long-term credit rating by one notch, from AA to AA-, because of weak growth and high levels of private sector debt.

The ratings agency added that the country's high unemployment would remain a drag on the economy.

Explaining its decision to downgrade Spain, S&P said: "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."

It noted the "incomplete state" of labour market reform, and added: "The financial profile of the Spanish banking system will, in our opinion, weaken further."

Last week, the Fitch agency also cut Spain's rating, a process that can raise a country's borrowing costs.

S&P's move comes as G20 finance ministers are due to meet on Friday to discuss the eurozone crisis.

On Thursday, Fitch downgraded the creditworthiness of UK banks Lloyds and Royal Bank of Scotland (RBS), and also Switzerland's UBS.

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