Moody's has announced that it has downgraded the credit rating of six European countries, while three other nations had their outlook cut to negative. These downgrades come as the European debt crisis persists and the economy remains weak.
Although the markets did not suffer much from Moody’s announcement of a downgrade to European countries, many within Europe are concerned about the credit rating cut as the countries struggle with a staggering economy and loads of debt.
Moody’s announced Monday that it will downgrade the credit rating of six European governments: Italy, Malta, Portugal, Slovakia, Slovenia and Spain. Meanwhile, Digital Journal reported earlier Tuesday that Austria, France and the United Kingdom had their outlook revised to “negative.”
Italy’s rating now sits at A2, Spain is rated at A1 and Portugal maintains a rating of Ba2. Malta is now at A2, Slovakia was downgraded to A1 and Slovenia was also cut to A1. All of these countries have been given negative outlooks.
“Moody's has reflected these constraints and exposures in its decision to downgrade the government bond ratings of Italy, Malta, Portugal, Slovakia, Slovenia and Spain as listed above,” stated Moody’s in a press release. “The outlook on the ratings of these countries remains negative given the continuing uncertainty over financing conditions over the next few quarters and its corresponding impact on creditworthiness.”
It added that the European nations of Denmark, Finland, Germany, Luxembourg, Netherlands, Sweden, Belgium, Estonia and Ireland are “appropriately positioned.”
European officials are questioning Moody’s decision because some of the countries that were downgraded are undergoing reforms.
Spain Finance Minister Cristobal Montoro was openly critical of Moody’s decision and said the despite the ratings agency being welcoming of the country’s reform measures, it still downgraded the country, according to BBC News.
“They say that yes, they welcome them [the reforms] and then they decide the opposite according to their criteria, it is fairly paradoxical,” said the finance minister in a radio interview. “It is good, they do their work, their valuations, but the truth is that it is a bit contradictory.
“They take a decision in which they say: 'We value the reforms they are making but they are not going to achieve their goals'. But what goals? The goal of returning to economic growth and employment? It seems to me that we are making the reforms.”
Following the announcement, the European markets rose sharply due in part to the Greek parliament approving austerity measures. According to NASDAQ, the German DAX, the French CAC, the UK FTSE 100 and Switzerland’s SMI all climbed.