Fresh Moody's downgrades
February 14, 2012
Moody's downgraded its credit ratings for Italy, Portugal, Spain, Slovakia, Slovenia and Malta on Monday, while also warning that it might cut its top-notch gradings for Austria, Britain and France.
The credit rating agency said the moves were needed to reflect the countries' "susceptibility to the growing financial and macroeconomic risks emanating from the euro area crisis."
All nine countries had their rating outlook set to negative by the New York-based agency "given the continuing uncertainty over financing conditions over the next few quarters."
It said that weakening economic prospects "threaten the implementation of domestic austerity programs and the structural reforms that are needed to promote competitiveness."
The agency also voiced concerns over the effectiveness of institutional change within the eurozone, and whether there were adequate resources in place to deal with the continuing crisis.
In the downgrades, Italy was cut one notch to A3 from A2, with Spain falling two points from A1 to A3 and Portugal dropping from Ba2 from Ba3. Slovakia and Slovenia both fell one step to A2, while Malta moved down one step to A3.
British Finance Minister George Osborne reacted swiftly to the announcement, claiming it validated his government's commitment to deficit reduction. "This is proof that, in the current global situation, Britain cannot waver from dealing with its debts," Osborne said.
Moody's move mirrors a similar one by Standard & Poor's last month, when France and Austria lost their triple-A status and Italy, Spain, Portugal, Cyprus, Malta, Slovakia and Slovenia were downgraded.
Market shares, the euro and the pound sterling fell in Tuesday trading in Tokyo following the news. The fall echoed trading patterns on Monday, after initial relief about Athens' approval of austerity measures gave way to concern that the Greek government may not be capable of delivering fiercely opposed reforms.
Earlier Monday, Standard & Poors downgraded its ratings on a host of Spanish banks. That came after S&P downgraded 34 Italian banks on Friday.
rc/ai (AFP, AP, Reuters)