Europe: UK and others on downgrade watch
The situation in Europe just received another jolt with Moodys placing UK and France on downgrade alert. This is a first for the UK but no surprise.
It is some sign though that medium term interest rates are not sustainable at current levels. The situation has a long way to play out.
Moody’s put the UK, France and Austria on negative outlook late on Monday night, raising the prospect that the three countries would lose their triple A ratings due to exposure to the eurozone debt crisis.
Moody’s, one of the agencies that assess the strength of the country’s public finances, said it was changing the UK’s outlook to ‘negative’ from ‘stable’.
That means there is a heightened risk that Moody’s could cut Britain’s credit rating from ‘AAA’, the highest level possible, if the public finances and economy deteriorate further in the coming months.