Two days before the summit of European Union heads of states in Brussels, the outlook of the economy in most European countries remained gloomy.

The decision of Standard & Poor's to cut down the credit of Spain mainly because of the increasing unemployment rate, prohibitive private sector debt and contracting credit has brought down the euro currency.

Economic deceleration among principal trading partners of Spain was also cited as one of the reasons for the lowering of ratings, according to a report from The Guardian.

S&P's stated that reforms in Spain's labour market are insufficient indicating that the government should be stricter in the implementation of approved changes which was reported by the Financial Times more than a year ago. The Spanish government has already endorsed a law that was supposed to give companies more jurisdictions in deploying workers and making it more cost-effective to terminate employees.

The ratings firm observed that the fiscal position of Spain digresses from budget goals.

Meanwhile, the Sueddeutsche Zeitung on Wednesday reported that the government of Prime Minister Angela Merkel has lowered its economic growth projection for 2012 to approximately 1.0 percent from the previous valuation of 1.8 percent.

This decision was based on the dismal showing of the global economy and continuing instability of financial markets.

To make matters worse, clashes between protesters and police in Athens intensified marking the first day of a nationwide protest action against austerity measures that the Greek government was implementing. Workers unions in Portugal have also declared a shutdown on Nov. 24.

Greece already obtained an agreement in 2010 for a €110 billion bailout package from the Europe Union and the International Monetary Fund but it needs to persuade international lenders that it would employ strict spending cuts to meet the requirements for each loan payment.

European Commission President Jose Manuel Barroso remains confident that an accord would be met during the weekend summit of European leaders that would provide guarantees for members of the euro single currency zone.