Rise in systemic stress prompts review of eurozone credit ratings

Standard & Poor’s (S&P) has put the long-term sovereign ratings of 15 eurozone member states on review with negative implications.

This means the ratings are under threat of a downgrade from the rating agency. Depending on the outcome of the review, Austria, Belgium, Finland, Germany, Netherlands, and Luxembourg could face a one notch downgrade, while the remainder, including Spain, Italy and France, could be downgraded by up to two notches.

S&P has also maintained the negative credit-watch status  on its long term ratings for Cyprus and put the country’s short term ratings on negative credit-watch. The ratings on Greece are unaffected.

“Today’s credit-watch 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,” S&P said in a statement.

The agency attributed the stresses to five inter-related factors: tightening credit conditions across the eurozone; higher risk premiums on a growing number of sovereigns; continuing disagreements among policy-makers on how to tackle the crisis; high levels of government and household indebtedness across the eurozone; and the rising risk of recession across the zone in 2012.

S&P expects to conclude its review of eurozone ratings as soon as possible after the EU summit on December 8 and 9.

The 15 countries placed on review are: Austria, Belgium, Finland, France, Germany, Luxembourg, The Netherlands, Estonia, Ireland, Italy, Malta, Portugal, Slovak Republic, Slovenia and Spain.