RegionsStandard & Poor’s Removes Downgrades EU Credit Rating to AA+

Standard & Poor’s Removes Downgrades EU Credit Rating to AA+

The European Union (EU) has lost its top AAA credit rating from Standard & Poor’s (S&P), which cited the deteriorating creditworthiness of the bloc’s 28 member nations for its downgrade to AA+.

The downgrade came after the credit ratings agency last month applied a similar downgrade to the Netherlands.

S&P maintained a stable outlook and a short-term rating of A-1+ for the EU.

In its accompanying commentary S&P said that downward pressure could build if the creditworthiness of highly-rated EU countries “was to deteriorate beyond our current expectations,” if future budget negotiations are “more protracted and acrimonious,” if member states apply to leave the EU, “or if its financial parameters markedly deteriorate”.

A lack of cohesion and solidarity among EU member states, particularly regarding the budget process, posed a credit risk, S&P added. “EU budgetary negotiations have become more contentious, signaling what we consider to be rising risks to the support of the EU from some member states.”

The EU countries that make the biggest contributions to the bloc’s budget have lobbied for reductions in their shares, while the UK government has said that it will hold a referendum in 2017 on whether to remain a member of the bloc.

This is “the first time in the EU’s history that a sitting government has proposed such a step,” S&P said. “Although this potential plebiscite is set for 2017, the UK general elections are expected in 2015 and we expect EU membership to be a key debate.”

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