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Moody’s lowers EU outlook to ‘negative’: fears big countries will prioritize their own debts

Wednesday, September 5th 2012 - 00:40 UTC
Full article 2 comments
Germany, France, Netherlands and UK contribute 45% of EU budget revenue Germany, France, Netherlands and UK contribute 45% of EU budget revenue

Moody's has lowered its outlook for the European Union's AAA credit rating to “negative” and warned that the bloc's rating could be downgraded. The move reflected the negative outlook for the ratings of the EU key budget contributors.

Earlier this year, Moody's put ratings of Germany, France, Netherlands and the UK on a negative outlook. It said that these nations were all exposed to the region's debt crisis, hurting their creditworthiness.

The ratings agency said that in case of “extreme stress”, the AAA-rated member states were more likely to service their own debt obligations rather than “prioritise their commitment to backstop the EU debt obligations”.

It added that if the AAA-rated member states were to default on their debt obligations, there were likely to be defaults on the loans that back the EU debt and the bloc's cash reserve was also likely be stressed.

“Hence, it is reasonable to assume that the EU creditworthiness should move in line with the creditworthiness of its strongest key member states,” the agency said.

Germany, France, Netherlands and UK together account for about 45% of the EU budget revenue. Moody's warned that if the credit ratings of these member states were downgraded, it could have a knock-on effect on the EU rating.

“Additionally, a weakening of the commitment of the member states to the EU and changes to the EU fiscal framework that led to less conservative budget management would be credit-negative,” it added.
 

Categories: Economy, International.

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  • vestias

    A UE tem de libertar-se das agências de rating mais poderosas elas meteram disciplina nos estados membros elas estão a controlar o mercado finaceiro elas provocaram a crise com o aumento das dividas e dos défices ou seja chamada a financiar os défices que ela própia causou

    Sep 05th, 2012 - 09:59 am 0
  • British_Kirchnerist

    SO they keep rating us lower but say if we do anything other than what we're already doing it would be worse? Yes that works...

    Sep 08th, 2012 - 10:03 pm 0
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