A UK exit from the European Union would affect the whole region's sovereign ratings, a senior Moody's analyst said on Friday, warning it would set a precedent that other countries could end up following. Dietmar Hornung, the firm's head of sovereign risk for Europe, also told Reuters it was monitoring Poland closely but was comfortable with its Portugal rating despite a bond market selloff.
Britain is expected to hold a referendum on whether to quit the 28-country EU in June or shortly after. All the main credit agencies have warned a vote to leave could hurt the UK's rating, but Hornung said it could have a wider impact. "If the UK did leave, it could be a credit negative for the EU," Hornung said. "It could be a destabilising element that leads to further fragmentation."
"Any exit from the EU or the euro area could add momentum to the centrifugal forces, because it could set the precedent." There is growing dissatisfaction in parts of the EU at the way the bloc is run. Critics also see the long-running battle to make governments bring their budgets closer into line with the bloc's rules as sapping power from national parliaments.
Hornung said that while a Brexit may not be enough to trigger instant downgrades or outlook changes, "from a credit perspective, what would be positive would be more policy co-ordination and harmonisation" in Europe, he added. "But what we currently see in the public debate are forces that pull in the opposite direction which adds a tension and credit-negative layer over Europe as a whole." One of the countries that has taken a particularly anti-establishment turn is A2 'stable' rated Poland.
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