Moody's Lowers UK to ‘Negative’ Outlook, Downgrades 6 European nations

Credit rating agency Moody’s has downgraded six euro zone nations and put the UK, Austria and France on negative outlook, citing their vulnerability to the euro zone debt crisis.

The UK currently has an “AAA” rating and the move by Moody’s placing the country in the negative outlook suggests that Britain’s triple A is at greater risk and there is an increased chance of downgrade within the next one-and-a-half years.

The Moody’s rating on the UK was a deviation from the earlier ratings of S&P and Fitch. They had maintained a stable outlook for the country.

"This is proof that, in the current global situation, Britain cannot waiver from dealing with its debts," the BBC quoted George Osborne, the Chancellor of the Exchequer, as responding to the Moody’s rate perception.

"This is a reality check for anyone who thinks Britain can duck confronting its debts,” he added.

On Monday, Moody’s also downgraded six other euro zone nations such as Italy, Spain, Malta, Portugal, Slovenia and Slovakia.

The rating agency has cited the ongoing debt crisis and its impact on different euro zone countries as the reasons for the downgrading.

Moody’s has pointed out the weakness of the European financial markets and the prospects of further shocks to the markets because of the con-tinuing crisis as the reasons for the current ratings.

S&P also had downgraded Italy, Malta, Portugal, Slovakia, Slovenia and Spain in January 2012. On the other hand, Fitch has downgraded only Italy, Slovania and Spain in January.

Moody’s rating has the biggest impact on Portugal as the country’s rating now stands at Ba3, a rating three notches below investment grade. Though Moody’s has put France and Austria on a negative outlook, S&P has downgraded both the countries in its earlier ratings.

Moody’s debt ratings which came after the US trading hours on Monday put the euro under pressure against major currencies in Asian trade on Tuesday morning. The rate cut came at a time when the markets were heaving a sigh of relief as a result of the Greek cabinet approving the austerity cuts to get the second bout of EU bailout.

“The rate cuts came just when the euro seemed to be recovering over prospects of a possible resolution to the Greek debt crisis,” Dow Jones quoted Sumino Kamei, senior analyst at the Bank of Tokyo-Mitsubishi UFJ, as saying.

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Written By: International Business Times