S&P raises Spain's credit rating one notch

Standard & Poor's raised Spain's credit rating by one notch to 'BBB+' on Friday, citing government economic reforms that have boosted economic growth, a day after Prime Minister Mariano Rajoy announced the next general election will be held on December 20.

"Spain's economy has benefited from two rounds of labour market reforms since 2010, which have improved competitiveness of the export and services sector, and from easier financial conditions," it said in a statement.

"Some of Spain's growth drivers -- including front-loaded tax cuts, lower oil prices, and a weaker exchange rate -- are likely to fade. Others -- including labour and other structural reforms, as well as easier financing conditions-- will, in our view, contribute permanently to Spain's more dynamic recovery than peers'."

Spain emerged in 2013 from five years of on-off recession. The country's conservative government forecasts an economic expansion of 3.3 percent this year -- more than twice the average growth rate predicted for eurozone countries.

Rajoy in 2012 passed labour market reforms making it cheaper for firms to lay off workers and limiting the power of unions to negotiate collective-bargaining agreements across entire industries or regions.

Now he has predicted a million jobs would be created over the 2014-2015 period.

The labour market reforms have been criticised by left-wing opposition parties, including the main opposition Socialists and new far-left party Podemos, a close ally of Greece's ruling Syriza, which made gains in May local elections.

Both the Socialists and Podemos have vowed to repeal the reform if elected.

Polls suggest Rajoy's conservative Popular Party may win most seats but will likely lose the majority it secured in 2011.