European governments risk getting their debt ratings cut as their economies struggle in the face of efforts to rein in overspending, rating agency Moody's Investors Service warned on Monday. "Given the magnitude of the fiscal challenge and the need to sustain tightened fiscal policies for many years, Moody's believes that the risks to economic growth are clearly a downside risk for sovereign ratings," it said in a report.
"This is especially true in Europe, where economic growth is likely to be lower than in the rest of the world because of the ongoing process of deleveraging and the likely simultaneous fiscal tightening across most of the continent," Moody's added.
The agency said that the ratings of Greece, Portugal, Ireland and Hungary had been cut in recent months and Spain put on review for a downgrade in part because of the deteriorating economic outlook for the countries. European leaders struggled in recent months to contain a debt crisis that focused on mainly Greece, Portugal and Spain due to their strained public finances and weak economies. Ireland and Hungary have also been of concern.
Moody's said that its top Aaa ratings for European economic heavyweights Germany, France and Britain were secure - although not as much as in the past.
Even though economic activity remains subdued, European governments are trying to drastically cut their budget deficits, which blew out dramatically in the global financial and economic crisis.
"Moody's will continue to carefully monitor the impact of GDP (gross domestic product) growth and government financial strength on European sovereigns as the deleveraging process unfolds," the agency said. "Those countries that are facing persistently strong deleveraging could experience renewed negative pressure on their ratings in the future, depending on how long the process lasts," it added.
Comments
Comments are closed.