S&P warns of broad euro zone downgrade over debt crisis

NEW YORK Mon Dec 5, 2011 5:47pm EST

1 of 2. A banner showing a Euro coin is seen on the facade of the European Commission headquarters ahead of a European Union heads of state summit in Brussels October 26, 2011.

Credit: Reuters/Francois Lenoir

NEW YORK (Reuters) - Standard & Poor's on Monday warned it may carry out an unprecedented mass downgrade of euro zone countries if EU leaders fail to reach an agreement on how to solve the region's debt crisis in a summit later this week.

The ratings agency placed the ratings of 15 euro zone countries, including top-rated nations Germany and France, on credit watch negative -- a move that signals a possible downgrade in no later than three months.

S&P said, however, it expects to conclude its review "as soon as possible" following this week's summit of EU leaders on Friday.

The action was "prompted by our belief that systemic stresses in the eurozone have risen in recent weeks to the extent that they now put downward pressure on the credit standing of the eurozone as a whole," the ratings agency said in a statement.

Of the 17 countries forming the euro zone, Cyprus' rating was already put on credit watch negative by S&P and Greece is rated CC, which already denotes high possibility of default in the near term.

If the downgrade materializes, countries such as Austria, Belgium, Finland, Germany, Netherlands, and Luxembourg would likely have their rating cut by one notch. The other countries could suffer downgrades of up to two notches, S&P said.

News of S&P's move their gains and the euro to erase early gains. U.S. stock index futures slipped further after the announcement, which came with U.S. markets closed.

The other two major ratings agencies, Moody's and Fitch, have already said they could soon review the ratings of top-rated euro zone countries, but they still maintain a stable outlook on them.

(Additional reporting by Daniel Bases; Editing by Chizu Nomiyama and Dan Grebler)

(The following story corrects the fifth paragraph to show S&P rates Greece at CC, not CCC)

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Comments (9)
THeRmoNukE wrote:
Well, they can’t downgrade the US again without adjusting Euro members first…

Dec 05, 2011 4:33pm EST  --  Report as abuse
blooptoopsoop wrote:
I guess now some people can make a lot of money again.
Bad ratings means higher interest rates on loans for countries….
So maybe we should look into these rating agencies and see who profits from their actions

Dec 05, 2011 4:55pm EST  --  Report as abuse
Mott wrote:
This rating system should be about its ability to accurately assess, predict and correlate the result with its rating well before occurrence.

Instead, its lithargic in its approach of assigning a rating way-over after the fact when much of the rating is common-sense and is well-known to the community.

Dec 05, 2011 5:15pm EST  --  Report as abuse
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