Moody’s Investors Service will review the credit ratings of all European Union (EU) countries, after last week’s summit failed to come up with a concrete solution to the debt crisis.
Last Friday, European policymakers announced a number of measures to bolster the eurozone’s financial stability, including proposals to implement closer fiscal union in the EU and automatic sanctions for members with excessive deficits.
However, Moody’s claims these are very similar to previously-announced plans and demonstrate “the continued absence of decisive policy measures despite the recent euro area summit”.
The ratings agency says: “Overall, Moody’s believes that the announced measures reflect the continuing tension between euro area leaders’ recognition of the need to increase support for fiscally weaker countries and the significant opposition within stronger countries to doing so.
“The announced measures therefore do not change Moody’s previously expressed view that the crisis is in a critical and volatile stage, with sovereign and bank debt markets prone to acute dislocation which policymakers will find increasingly hard to contain.”
In light of the lack of action on resolving the eurozone debt crisis, Moody’s intends to progress with its plan of reviewing the ratings of all 27 EU members in the first quarter of 2012.
The move follows the decision of Standard & Poor’s (S&P) to place the AAA credit rating of the EU on “credit watch with negative implications”. The agency made the move after issuing a similar warning to 15 eurozone states.
S&P will carry out the review of ratings “as soon as possible” now the European leaders’ summit has ended.
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