ALPBACH, Austria, Sept 3 A joint bond issue by
euro zone countries would get the weakest member's rating if the
issue was jointly guaranteed, the head of Standard & Poor's
European sovereign ratings said on Saturday.
S&P was not in talks with the European Union about the idea
because that would present a potential conflict of interest,
Moritz Kraemer, managing director, EMEA sovereign ratings, told
a panel discussion at the Alpbach Forum economic.
Kraemer said his understanding was that joint euro bonds
would be structured along the lines of Germany's jumbo bonds, in
which federal states team up to issue debt and each guarantees
its own bit.
"If the euro bond is structured like this and we have public
criteria out there then the answer is very simple. If we have a
euro bond where Germany guarantees 27 percent, France 20 and
Greece 2 percent then the rating of the euro bond would be CC,
which which is the rating of Greece," he said.
"If it is a joint and not a several guarantee then it would
be the weakest-link approach, as we call it," he added.
"Possibly this could be structured in a different way. I
don't know because.we are not in talks with the EU. It is not
our task to help structuring or advising. We don't do this again
to prevent conflict of interest," he said.
Standard & Poor's In July cut Greece's sovereign credit
rating further into junk territory, lowering it to CC from CCC,
saying the European Union's proposed debt restructuring would
put the country into "selective default".
S&P was the last of the three major rating agencies to warn
of a default after euro zone leaders and banks agreed that the
private sector would shoulder part of the burden of the rescue
package that offers Greece more cash and easier loan terms to
keep it afloat.
(Reporting by Michael Shields)