Another nail in the ratings coffin
(16 January 2012 – Europe) Standard & Poor (S&P)’s has downgraded the credit ratings of nine euro-zone countries, leaving Germany with its coveted triple-A status, but stripping it from France and Austria.
'Today's rating actions are primarily driven by our assessment that the policy initiatives that have been taken by European policymakers in recent weeks may be insufficient to fully address ongoing systemic stresses in the eurozone,' the US-based ratings agency said in a statement.
There has also been a setback in negotiations on a debt swap by private creditors to avert Greek default. Talks broke up without agreement last week, but are expected to resume this week.
If Greece cannot persuade banks and insurers to accept voluntary losses on their bond holdings, a second international rescue package for the euro zone's most heavily indebted state will unravel, raising the prospect of bankruptcy in late March, when it has to redeem €14.4 billion (A$17.6 billion) in maturing debt.
S&P cut the ratings of Italy, Spain, Portugal and Cyprus by two notches and the standings of France, Austria, Malta, Slovakia and Slovenia by one notch each.
It put 14 euro-zone states on negative outlook for a possible further downgrade, including France, Austria, and still triple-A-rated Finland, the Netherlands and Luxembourg.
Germany was the only country to emerge totally unscathed with its triple-A rating and a stable outlook.
S&P said the euro zone faced stresses, including tightening credit conditions, rising risk premiums for a growing number of sovereigns, simultaneous deleveraging by governments and households, and weakening economic growth prospects.
It also cited political obstacles to a solution to the crisis due to 'an open and prolonged dispute among European policymakers over the proper approach to address challenges.'
There has also been a setback in negotiations on a debt swap by private creditors to avert Greek default. Talks broke up without agreement last week, but are expected to resume this week.
If Greece cannot persuade banks and insurers to accept voluntary losses on their bond holdings, a second international rescue package for the euro zone's most heavily indebted state will unravel, raising the prospect of bankruptcy in late March, when it has to redeem €14.4 billion (A$17.6 billion) in maturing debt.
S&P cut the ratings of Italy, Spain, Portugal and Cyprus by two notches and the standings of France, Austria, Malta, Slovakia and Slovenia by one notch each.
It put 14 euro-zone states on negative outlook for a possible further downgrade, including France, Austria, and still triple-A-rated Finland, the Netherlands and Luxembourg.
Germany was the only country to emerge totally unscathed with its triple-A rating and a stable outlook.
S&P said the euro zone faced stresses, including tightening credit conditions, rising risk premiums for a growing number of sovereigns, simultaneous deleveraging by governments and households, and weakening economic growth prospects.
It also cited political obstacles to a solution to the crisis due to 'an open and prolonged dispute among European policymakers over the proper approach to address challenges.'
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