By TraderVox.com
Tradervox.com (Dublin) – The debt crisis in euro zone has worsened and it is now affecting the overall rating of the European Union. According to a report by Moody’s Investors Service rating company, outlook for the EU has been downgraded to negative from stable as a result of risks to France, Germany, UK and Netherlands, which are the biggest contributors of the Union’s budget. The rating company also downgraded the outlook on the Union’s provisional AAA rating to negative from stable for its medium term note program. These moves by Moody’s are hurting investor confidence in the region which is already down from the prolonged debt crisis.
According to the statement released on Monday, the change is reflective of the negative outlook on the AAA ratings of the member countries that contribute largely to the EU budget. The statement indicated that the member states’ creditworthiness is correlated as they are all exposed to euro region debt crisis. The move has come at a time when German Central Bank, Bundesbank, is opposing the move by the European Central Bank to rollout a bond buying program aimed at lowering borrowing costs for nations wallowing in debt crisis. However, German Chancellor Angela Merkel has reiterated her commitment to supporting ECB efforts to salvage the euro. Delivering the statement, Moody’s indicated that the weakening commitment of the member states to the changes proposed to the EU’s fiscal framework have resulted to conservative budget which is credit negative.
In a bid to salvage the debt crisis in euro region, Mario Draghi, the European Central Bank President, has indicated that he is committed to buying three-year government bonds as a measure to bring down high borrowing costs. This will probably save the EU ratings as Moody’s indicated that its outlook could be changed to stable of ratings on key countries was restored to AAA status.
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