Moody's downgrades euro zone rescue funds, keeps negative outlook

BRUSSELS Sat Dec 1, 2012 8:30am IST

A bank employee counts Euro notes at Kasikornbank in Bangkok October 12, 2010. REUTERS/Sukree Sukplang/Files

A bank employee counts Euro notes at Kasikornbank in Bangkok October 12, 2010.

Credit: Reuters/Sukree Sukplang/Files

Related Topics

BRUSSELS (Reuters) - Credit ratings agency Moody's cut its rating for the euro zone rescue funds ESM and EFSF to Aa1 from Aaa following its downgrade of France earlier in November, the agency said on Friday.

It said the downgrade of the ESM and the EFSF, which were created to stabilise the euro zone by providing financial assistance to euro area member states in difficulty, was prompted by the high correlation in credit risk among the rescue funds and their largest financial supporters.

Moody's stripped France of its prized triple-A badge this month, cutting the sovereign credit rating on Europe's No. 2 economy by one notch to Aa1 from Aaa. It cited an uncertain fiscal outlook and deteriorating economy.

"Moody's view that there is a high correlation in credit risk among the entities' supporters is consistent with the evolution to date of the euro area debt crisis and the close institutional, economic and financial linkages among the major euro area sovereigns," Moody's said.

The agency said it kept a negative outlook for the new credit rating.

The EFSF and ESM said in a statement late on Friday that they took note of Moody's decision but did not agree with it.

"We disagree with the rating agency's approach which does not sufficiently acknowledge ESM's exceptionally strong institutional framework, political commitment and capital structure," said Klaus Regling, managing director of the ESM and chief executive of EFSF.

Moody's had announced it would review the Aaa rating of the two funds after the downgrade of France.

The euro pared most gains versus the U.S. dollar in late Friday trade after Moody's downgrade.

(Reporting By Robert-Jan Bartunek)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Press Event

Press Event

Modi takes tea, but no questions, in first press event as PM.  Full Article 

School Shooting

School Shooting

Two killed, four wounded in Washington state school shooting.  Full Article 

Sundar Pichai Elevated

Sundar Pichai Elevated

Google's Pichai to oversee major products and services.  Full Article 

Need For Reforms

Need For Reforms

Euro zone risks "relapse into recession" without structural reforms - Draghi.  Full Article 

Diwali Sales

Diwali Sales

Gold sales jump about 20 pct for Diwali - trade body  Full Article 

World Bank Rival

World Bank Rival

Three major nations absent as China launches W.Bank rival in Asia  Full Article 

Wal-Mart India

Wal-Mart India

Murali Lanka appointed as Wal-Mart India operations chief  Full Article 

Health Of Lenders

Health Of Lenders

25 European banks set to fail health checks - sources.  Full Article 

India Insight

India Insight

Kalki Koechlin on her role as a disabled girl in “Margarita, With a Straw”  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage