EU summit not enough to ease sovereign pressure
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Xinhua, December 13, 2011
Three major ratings agencies said on Monday that last week's EU summit was not enough to ease pressure on eurozone sovereign debt since no decisive initiatives were adopted, warning to review the region's credit.
"The communique issued by European policy-makers after the recent euro area summit offers few new measures and therefore does not change our analysis of the rising threat to the cohesion of the euro area and the further shocks to which it and the wider EU remain prone." Moody's Investors Service said in a release.
The ratings agency said it planned to complete its re- evaluation of all EU countries during the first quarter of 2012. " As we announced in November, unless credit market conditions stabilize in the near future, our ratings of all EU sovereigns will need to be revisited."
Moody's was echoed by its rival Fitch, which agreed that "the lack of a comprehensive solution has increased short-term pressure on eurozone sovereign credit profiles and ratings."
Fitch appreciated the positive developments of the latest EU summit including framework for a more viable eurozone and ultimately greater fiscal union, an extra 200-billion-euro funding for the IMF and the forward-bring of European Stability Mechanism etc, but it saw no "comprehensive solution" to the current crisis and predicted "a significant economic downturn across the region" in the short term.
Meanwhile, Jean-Michel Six, chief economist of Standard & Poor' s also said EU summit agreement was a significant step forward, but not enough.
Last week, S&P has put 15 eurozone countries under credit watch for a potential downgrade, saying it expected "review of eurozone sovereign ratings as soon as possible following the EU summit", and "depending on the score changes, if any, that our rating committees agree are appropriate for each sovereign, we believe that ratings could be lowered by up to one notch for Austria, Belgium, Finland, Germany, Netherlands, and Luxembourg, and by up to two notches for the other governments."
