Moody’s changed outlook on core European countries

Filed in Gather Money Essential by on July 30, 2012 0 Comments

Moody’s sees pressure from the imminent exit of Greece from the Euro financial system, effecting the core of Europe, especially Spain and Italy. As reported by Business Insider, “The ratings agency sees the likelihood of a Greek default and euro exit and/or the costs associated with trying to keep the country in the euro as mounting risks for Europe’s strongest economies.”

That’s why the credit rating agency lowered their outlook on Germany, Netherlands and Luxembourg—three very stodgy countries—from a stable outlook to negative. Their credit ratings will remain the same which all stand at triple-A, Aaa, according to Moody’s; but they are on watch for the possibility of default by way of their cumbersome relationship with the European Central Bank. If and when the ECB breaks down and becomes the central bank that delivers a banking bailout, the core of Europe will have to pay the price. Moody’s sees an imminent threat that could shake the core of Europe.

Essentially, Moody’s foresees numerous adversities for the AAA countries. For Germany these include: a credit event on sovereign debt, given the systemic risk in Europe; an increase in contingent liabilities that would rankle their current debt levels; and, exposure to bad debt, particularly in Italy and Spain.

Also, Moody’s released that they changed the credit outlook of a German rescue bank, “In a related rating action, Moody’s has today changed the outlook to negative from stable for the long-term Aaa rating and short-term P-1 rating of FMS Wertmanagement. Like Germany’s Aaa rating, the ratings of this entity remain unchanged.”

Treasury secretary, Timothy Geithner, was seen on Charlie Rose the other night making a plea for quick, decisive action by Germany for the problem in Europe. The Wall Street Journal quotes Geithner, “If you leave Europe on the edge of the abyss as your source of leverage, your strategy’s unlikely to work because you’re going to raise the ultimate cost of the crisis…”

Also related, the credit ratings agency maintained a stable outlook for Finland. The Guardian highlights Finland’s outstanding financial position. The country is surprisingly the only one in Europe with an AAA rating and a stable outlook, thanks to its net revenues. Finland has an insulated banking system that serves its country well. In addition, the country is highly ranked in Western Europe when it comes to per capita income.

 

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