Moody’s cuts euro zone credit rating outlook to ‘negative’

London, United Kingdom (4E) – Moody’s has cut its outlook of the euro zone’s credit rating, downgrading it from “stable” to “negative” citing recent outlook downgrades of several AAA-rated European Union economies.

On Monday, Moody’s announced it was downgrading the economic outlook for Germany, Netherlands and Luxembourg as the risk of a possible Greek exit from the common currency and potential bailouts for Italy and Spain increases.

The credit agency stated that the move was a reflection of the declining ratings outlook for top contributors of the EU budget. Moody’s said it only made sense that the credit rating of the EU must move in line with the rating of its strongest member states.

In case of extreme conditions, the ratings agency said the AAA-rated economies will most likely put its own debt obligations ahead of its commitment to support the debt obligations of other EU members.

Around 45 per cent of the EU budget revenue comes from Germany, UK, France and the Netherlands.

News of the outlook downgrade immediately prompted Germany’s finance ministry to issue a statement stating that the country remains as the euro zone’s most stable economy.

While it takes note of Moody’s findings, the finance ministry maintains that the data merely focused on short-term risks without putting the long-term stability prospects into consideration. The ministry also adds that several measures have already been initiated by the euro zone that aim to create long-lasting stability.

Moody’s said that despite the introduction of structural features that further enhance the EU’s creditworthiness, they believe they are not enough to separate EU’s ratings from those of its key members.

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