Moody’s Investors Service has given the UK’s triple-A credit rating a negative outlook and downgraded Italy, Portugal and Spain in light of the continued risks in Europe.
The moves, which affect a total of nine European countries, were carried out to reflect the “growing financial and macroeconomic risks” coming out of the eurozone debt crisis and the funding pressures they create for European sovereigns.
The ratings agency says the continued uncertainty over the institutional reform of the eurozone’s fiscal and macroeconomic framework, as well as concerns about the resources that will be made available to combat the crisis, are reasons behind the actions.
Moody’s also cites “Europe’s increasingly weak macroeconomic prospects, which threaten the implementation of domestic austerity programmes and the structural reforms that are needed to promote competitiveness”.
In addition, the organisation highlights the impact the above factors are likely to have on market confidence, which may increase the risk of further shocks to funding conditions for stressed sovereigns and banks.
The UK, Austria and France have seen the outlook on their Aaa credit ratings placed on negative outlook, meaning a future downgrade is possible.
Italy and Malta have been downgraded from A3 to A2, while Spain’s rating has been slashed from A3 to A1. The ratings of Slovakia and Slovenia have been lowered from A2 to A1 and Portugal’s has been cut from Ba2 to Ba3.
“An important factor limiting the magnitude of Moody’s rating adjustments is the European authorities’ commitment to preserving the monetary union and implementing whatever reforms are needed to restore market confidence,” Moody’s adds.
“These rating actions therefore take into account the steps taken by euro area policymakers in agreeing to a framework to improve fiscal planning and control and measures adopted to stem the risk of contagion.”
The agency considers the ratings of Denmark, Finland, Germany, Luxembourg, the Netherlands, Sweden, Belgium, Estonia and Ireland to be “appropriately positioned”. A review of Cyprus is ongoing.
At 8:40 this morning, the FTSE was down 0.27 per cent to 5890.