Standard & Poor's Ratings Services on Monday placed its long-term sovereign ratings on 15 members of the European Economic and Monetary Union (EMU or eurozone) on CreditWatch with negative implications.
It has also maintained the CreditWatch negative status of our long-term rating on Cyprus and placed its short-term ratings on CreditWatch with negative implications. The ratings on Greece have not been placed on CreditWatch. The ratings on the eurozone sovereigns are listed below.
"Today's CreditWatch placements are 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 global credit ratings firm said in a statement.
S&P believes that these systemic stresses stem from five interrelated factors:
(1) Tightening credit conditions across the eurozone;
(2) Markedly higher risk premiums on a growing number of eurozone sovereigns,
including some that are currently rated 'AAA';
(3) Continuing disagreements among European policy makers on how to tackle the immediate market confidence crisis and, longer term, how to ensure greater
economic, financial, and fiscal convergence among eurozone members;
(4) High levels of government and household indebtedness across a large area
of the eurozone; and
(5) The rising risk of economic recession in the eurozone as a whole in 2012.
Currently, we expect output to decline next year in countries such as Spain,
Portugal and Greece, but we now assign a 40% probability of a fall in output
for the eurozone as a whole.
"Our CreditWatch review of eurozone sovereign ratings will focus on three of
the five key factors that form the core of our sovereign ratings methodology:
the political, external, and monetary scores we assign to the governments in the eurozone.
Our analysis of political dynamics will focus on both country-specific and eurozone-wide issues that appear to us to be limiting the effectiveness of efforts to resolve the market confidence crisis. Our analysis of external liquidity will focus on the borrowing requirements of both eurozone governments and banks. Our analysis of monetary flexibility will focus on ECB policy settings to address the economic and financial stresses the countries in the eurozone are increasingly facing.
We expect to conclude our review of eurozone sovereign ratings as soon as
possible following the EU summit scheduled for Dec. 8 and 9, 2011. 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," S&P said.
S&P said that its ratings on Greece (Hellenic Republic; CC/Negative/C) are not affected by today's actions, as a 'CC' rating under it's rating definitions connotes the belief that there is a relatively high near-term probability of default.