EU loses AAA rating in S&P downgrade

500 Euro Note

Credit rating agency Standard & Poor's incited the ire of European Union officials on Friday when it snatched away the region's top AAA rating, citing tensions between member states and a deterioration in their overall financial health.

Downgrading the EU to AA+, the agency said the 28 countries' combined creditworthiness had declined – but officials and leaders shot back with an assertion that the region had barely any outstanding debt relative to GDP.

Olli Rehn, the European commissioner for economic and monetary affairs, said: "The commission disagrees with S&P that member states' obligations to the budget in a stress scenario are questionable. All member states have always, and also throughout the financial crisis, provided their expected contributions to the budget in full and in time."

S&P, which recently cut its ratings on the Netherlands and France, said the wider region faced growing risks and "cohesion among EU members has lessened".

"EU budgetary negotiations have become more contentious, signalling what we consider to be rising risks to the support of the EU from some member states," the agency said.

There was more upbeat news for the eurozone, however, with European commission data showing consumer confidence had picked up to a 29-month high this month.

Howard Archer at IHS Global Insight commented: "Hopefully, the renewed and appreciable strengthening in consumer confidence in December and the help to purchasing power coming from muted inflation across the eurozone (just 0.9% in November) will increasingly underpin consumer spending and help eurozone economic recovery to gradually gain traction over the coming months."

Powered by Guardian.co.ukThis article was written by Katie Allen, for theguardian.com on Friday 20th December 2013 17.46 Europe/London

guardian.co.uk © Guardian News and Media Limited 2010

 

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