Moody’s Cuts European Ratings

On Monday, rating agency Moody’s cut the debt ratings of six European countries and warned it may cut the triple-A ratings of France, Britain and Austria.

It cut the ratings of Italy, Portugal, Slovakia, Slovenia and Malta by one notch and downgraded Spain by two notches, from A1 to A3.

Moody’s attributed its decision to growing risks from Europe’s debt crisis – “the uncertainty over the euro area’s prospects for institutional reform of its fiscal and economic framework”. The agency also said the region’s weak economy could undermine austerity measures undertaken by governments to improve their finances.

The rating agency put France, Britain and Austria on “negative outlook”, which indicates that there is a 30% chance of a downgrade in the next 18 months. Britain’s finance minister responded by saying that the country must focus on cutting its large budget deficit. The French government said it would concentrate its policies on improving competitiveness and growth while reducing the deficit.

Moody’s announcement follows last month’s rating downgrades by Standard & Poor and Fitch. S&P downgraded France’s top-notch AAA rating and cut the credit ratings of Italy, Spain, Cyprus and Portugal. Fitch downgraded the sovereign credit ratings of Belgium, Cyprus, Italy, Slovenia and Spain.

Sources: Reuters and BBC

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