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‘Ratings of whole EU at risk’

Leading credit rating agency Moody’s warns the euro crisis is threatening the ratings of all countries in the EU

28 November 2011

THE “rapid escalation” of the economic crisis in the eurozone is threatening the ratings of all European countries, says credit ratings agency Moody’s.

The firm has upped the pressure on the EU, ahead of a crucial meeting of eurozone finance ministers in Brussels tomorrow.

Ministers are trying to shore up the financial markets’ confidence, after the eurozone’s sovereign debt crisis worsened last week.

Moody’s said in a statement: ““In the absence of major policy initiatives in the near future which stabilise credit market conditions, or those conditions stabilising for any other reason, the point is likely to be reached where the overall architecture of Moody’s ratings within the euro area, and possibly elsewhere within the EU, will need to be revisited. Moody’s expects to complete such a repositioning during first quarter of 2012.”

It added: “While Moody’s central scenario remains that the euro area will be preserved without further widespread defaults, even this ’positive’ scenario carries very negative rating implications in the interim period.

“The political impetus to implement an effective resolution plan may only emerge after a series of shocks, which may lead to more countries losing access to market funding for a sustained period and requiring a support program.”

A series of defaults is looking increasingly possible, it said, adding that this would also increase the likelihood of one or more members leaving the eurozone, a scenario which Moody’s believes would have a negative impact on the credit standing of all EU countries.

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