EU loses AAA rating from S&P

Written by on December 20, 2013 in Business - No comments

Credit ratings agency Standard&Poor’s said on December 20 that it cut the European Union’s supranational rating from AAA to AA+ to reflect “the overall weaker creditworthiness of the EU’s 28 member states”.

The agency changed EU’s outlook to “negative” in January 2012, signalling that a downgrade was possible.

“Since then, the average rating of the net contributors to the EU budget (weighted by GDP) has decreased to AA from AA+. We have also lowered the ratings on France, Italy, Spain, Malta, Slovenia, and Cyprus and, on November 29 2013, we lowered the ratings on one AAA-rated EU member (The Netherlands), which now leaves six AAA rated members,” S&P said.

“In our view, EU budgetary negotiations have become more contentious, signalling what we consider to be rising risks to the support of the EU from some member states,” the credit rating agency said.

The lower credit rating had a “stable” outlook, reflecting S&P’s view that the risks to our long-term rating on the EU were balanced.

“We could consider raising the rating if we saw that the creditworthiness of EU member states improved, particularly that of its larger and higher rated members. Downward pressure could build if the sovereign creditworthiness of highly rated net contributing EU sovereigns was to deteriorate beyond our current expectations, if we were to consider future budgetary negotiations more protracted and acrimonious, if members apply to leave the EU, or if its financial parameters markedly deteriorate,” S&P said.

(Photo: Haydn Blackey/flickr.com)

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