Moody's Investors Service today put the Spanish government's bond ratings on review for a possible downgrade, citing funding pressures and a precedent set by the euro zone's debt package for Greece.

Moody's said any change in the Aa2 rating would likely be limited to one notch.

Meanwhile, Spanish Prime Minister Jose Luis Rodriguez Zapatero announced an early general election in November, four months early than scheduled.

Moody's noted continued funding pressures facing the Spanish government and said the precedent set for future euro-area support by the Greece package was likely to exacerbate this.

It also said it saw challenges posed to the government's fiscal consolidation efforts by the weak growth environment and the continued fiscal slippage among several regional governments.

Spain, with an economy the size of the Greek, Irish and Portuguese economies combined, has been battling to convince markets that it should not be lumped together with the three lame ducks now under EU and IMF rescue programmes. But it continues to suffer from the risk of contagion from the crisis.

The rating agency also threatened to lower the ratings of four Spanish banks, including the euro zone's largest Santander, as well as the country's confederation of savings banks.

The three other banks concerned are BBVA, CaixaBank and La Caixa. Moody's said the decision is the result of its plan to downgrade Spain's debt rating.

Spain unemployment eases but still at record level

Spain's unemployment rate eased slightly in the second quarter to 20.89%, according to official data released today, but remains the highest in the industrialised world.

At the end of June there were 4.83 million people unemployed in the country, down from 4.91 million at the end of March, or a rate of 21.29%, the National Statistics Institute said.

The figures were published against a background of severe strains on the Spanish economy arising from depressed economic activity and high public deficits and debt.

Unemployment soared in Spain after the collapse of the property bubble in 2008, which helped plunge the country into recession. It stabilised in 2010 and has shown slow growth in early 2011.

The latest jobless rate remains above the level of of 20.33% in the fourth quarter of 2010, which at the time was already the highest since 21.30% in 1997. The rate reached its lowest level, 7.95%, in 2007.

Unemployment, currently the highest in the European Union and in the countries of the Organisation for Economic Cooperation and Development (OECD), remains the principal black spot in the battered economy.

The government has revised downwards its jobless forecast for 2011, to 19.8% from 19.3% previously. Madrid has also cut its growth predictions for 2012 and 2013, forecasting 2.3% and 2.4% respectively, instead of 2.5% and 2.7%.