Moody’s ratings agency has downgraded its outlook on the Aaa rating of the European Union from ‘stable’ to ‘negative,’ linking the decision to a recent outlook downgrade of the bloc’s major economies.
"The negative outlook on the EU's long-term ratings reflects the negative outlook on the Aaa ratings of the member states with large contributions to the EU budget: Germany, France, the UK and the Netherlands, which together account for around 45 per cent of the EU's budget revenue," Moody’s said in a statement on Monday.
The agency also cut its outlook on the provisional (P)Aaa rating of the EU's medium-term note (MTN) program from ‘stable’ to ‘negative.’
The outlook downgrade comes after the agency changed to negative its outlook for Germany and Holland's Aaa ratings on July 23. Moody’s explained that it was reasonable to assume that the EU's creditworthiness should move in line with the creditworthiness of its strongest key member states. The outlook on France and the UK are also negative.
Moody’s warned that it may downgrade the European Union's rating if it decides to cut the ratings of Germany, France, the UK and the Netherlands.
The agency also added that the outlook for the EU could go back to 'stable' if the outlooks on the four major European economies are first.