WASHINGTON - Moody's on Monday chopped the
debt ratings of Italy, Spain and Portugal and put France, Britain and Austria
on warning, saying they were increasingly vulnerable to the eurozone crisis.
Casting doubt over whether Europe's leaders
were doing enough to reverse the downslide of the region's economy and
financial sector, Moody's also cut its ratings for Slovenia, Slovakia and
Malta.
The ratings agency cited the region's weak
economic prospects as threatening "the implementation of domestic
austerity programs and the structural reforms that are needed to promote
competitiveness."
Meanwhile, market confidence "is likely
to remain fragile, with a high potential for further shocks to funding
conditions for stressed sovereigns and banks."
The agency also questioned whether Europe was
pulling together adequate resources to deal with the crisis.
"To a varying degree, these factors are
constraining the creditworthiness of all European sovereigns and exacerbating
the susceptibility of a number of sovereigns to particular financial and
macroeconomic exposures."
In the ratings, Austria, France and Britain
all remained with the top AAA rating but were put on negative outlooks, a
warning that if conditions worsen they could be hit with full downgrades.
Italy was cut one notch to A3 from A2; Spain
two notches to A3 from A1, and Portugal one step to Ba3 from Ba2.
Slovakia and Slovenia both went down one step
to A2, while Malta moved one step to A3.
The downgrades came a day after Greece and
Europe appeared to pass a major hurdle when the Greek parliament agreed to a
tough austerity package despite rioting in the streets of Athens and other
cities.
That appeared to open the way for a
comprehensive debt restructuring and second massive bailout of the country,
avoiding a default that could have sparked more turmoil in the eurozone.
"The negative outlooks reflect the
presence of a number of specific credit pressures that would exacerbate the
susceptibility of these sovereigns' balance sheets, and of their ongoing
austerity programs, to any further deterioration in European economic
conditions and financial landscape," it said.
Moody's said it had limited the magnitude of
the rating cuts due to the "European authorities' commitment to preserving
the monetary union and implementing whatever reforms are needed to restore
market confidence."
It cited the agreement by EU leaders on a
framework for disciplined fiscal planning as well as the measures already
adopted to lower the risk of contagion in the region emanating from the most
troubled countries.
In putting France on warning - the country's
top rating has already been cut by Standard & Poor's - Moody's said Paris's
debt situation was deteriorating, and "now among the weakest of France's
Aaa-rated peers."
It pointed to "significant risks to the
French government's ability to achieve its fiscal consolidation targets, which
could be further complicated by a need to support other European sovereigns or
its own banking system."
As for Britain, Moody's said there was
"increased uncertainty" over the pace of the government's efforts to
cut its fiscal deficit due to slower growth prospects.
"Any further abrupt economic or fiscal
deterioration would put into question the government's ability to place the
debt burden on a downward trajectory by fiscal year 2015-16."
Italy was downgraded due to similar reasons,
that weak economic growth could prevent it from hitting targets for closing its
budget gap and slashing debt.
In Spain, it said the outlook faced the
problem that the country's regional governments were not closing their local
spending gaps fast enough.
"Moody's is skeptical that the new
government will be able to achieve the targeted reduction in the general
government budget deficit, leading to a further increase in the rapidly rising
public debt ratio."
AFP
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