December 23, 2011

Austria Stable at AAA: Moody's

Agency repeats other raters' warnings on euro zone's debt crisis

Moody's Investors Service kept Austria's credit rating stable at AAA on Friday, but repeated an earlier warning from other ratings agencies about the effects of the debt crisis, not just on Austria but also on other euro zone countries.

Moody's warned about the consequences of European leaders not finding a way out of the crisis, Reuters reported. In a statement, the agency said: "The longer the sovereign and bank funding markets remain volatile, the more likely it is that further credit pressures will develop for most euro area countries, including Aaa-rated [ones]."

Earlier in the month, Moody's said it intends to review the ratings of all 27 European Union (EU) countries in first-quarter 2012.

The agency is not alone in its concern. On Dec. 6, Standard & Poor's warned that the continuing crisis could lead it to cut ratings on 15 of the 17 euro zone countries, including formerly solid Germany, France and Austria. And on Dec. 16, Fitch Ratings put six euro zone countries, including Spain and Italy, on watch for possible downgrades in the near term, citing its disbelief that a comprehensive solution to the crisis was possible.

Two European government sources who declined to be identified said that S&P's decision on those 15 ratings was expected in January. One was quoted in the report saying, "We have got an informal signal from Standard & Poor's that they will come only in January."

Moody's also said that, although Austria's AAA ratings were still stable, they were growing ever more dependent on a resolution of the euro zone crisis "which has begun to negatively affect core euro area member states like Austria." It also pointed out that the considerable size of the country's banking sector, coupled with its exposure to central and eastern Europe, meant substantial risk.

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