LONDON, Feb 12 (Reuters) - Spain faces sizeable risks to its public finances and, along with Ireland, is among the most vulnerable nation with a top credit rating, Moody's Investor Services said in a report on triple-A rated countries on Thursday.
The report does not constitute a change in the rating or outlook for any of the countries mentioned, Moody's said.
The ratings agency said the UK, United States and Ireland also face considerable challenges to their debt positions as they loosen fiscal policy to fight recession.
But the UK and United States have the scope to improve their positions, which puts them in the "Resilient Aaa" category, Moody's said, while Spain has only moderate means to improve its fiscal standing. Ireland, which was put on "Aaa Negative Outlook" last month, too has only moderate means to deal with the considerable challenges facing its public finances.
"Ireland's rebound potential -- and to a lesser extent Spain's -- appears more disputable given the extent to which their growth models are challenged," Moody's analysts said in the report.
At the moment, Spain, the UK and the United States all have "Aaa Stable Outlook" ratings from Moody's.
In its report, Moody's outlined three groups to gauge a government's ability to stretch its balance sheet while remaining a safe investment destination: "Resistant", "Resilient" and "Vulnerable".
The "Resistant" category included Germany, France, Canada and the four Scandinavian countries, whose ratings have so far been untested.
These countries have either entered the financial crisis from a very strong position or have economic models that remain robust, it said.
The "Resilient" group comprises the United States and the UK, whose ratings are being tested due to a shock to their growth model and large contingent liabilities.
But it added: "These countries display an adequate reaction capacity to rise to the challenge."
The size of the U.S. and UK economies, financial markets and capital flows and relative debt levels to growth mean policymakers have more scope to loosen fiscal policy without endangering the public finances too much.
Ireland and Spain fell into the third, "Vulnerable" group, which refers to nations which are forced to take risks with their public finances.
Moody's singled out Ireland as facing particular risks, given that it had a shorter timeframe in which it needed to adjust its public finances given the severity of the impact of the financial crisis on the government's fiscal positions, and the more rapid deterioration of its balance sheet.
Ratings agency Standard and Poor's in January downgraded Spain's sovereign debt rating to "AA+" from "AAA" in January, citing insufficient means to deal with weak growth and a ballooning budget deficit.
Below is a table of Moody's country breakdown of debt challenges and adjustment capacity.
Considerable Moderate Limited
Debt Debt Debt
Challenges Challenges Challenges -------------------------------------------------------------- Considerable Adjustment United States Capacity (Resilient) --------------------------------------------------------------
Australia
Canada
Germany Denmark Sizeable United France Finland Adjustment Kingdom Switzerland Luxembourg Capacity (Resilient) Austria Netherlands
(Resistant) Norway
Sweden
Singapore
(Resistant) -------------------------------------------------------------- Moderate Adjustment Ireland Spain New Zealand Capacity (Vulnerable) (Vulnerable) (Resistant)
(Reporting by Naomi Tajitsu, editing by Victoria Main)
Our Standards: The Thomson Reuters Trust Principles.