WASHINGTON — Moody’s warned Friday that a Greek pullout from the eurozone could lead to downgrades of the eurozone’s top-rated governments, including economic powerhouse Germany.
Moody’s also said that an EU rescue of Spain’s banking sector could force a cut to Spain’s sovereign rating due to the “increased risk to the country’s creditors.”
“Greece’s exit from the euro would lead to substantial losses for investors in Greek securities, both directly as a result of the redenomination and indirectly as a result of the severe macroeconomic dislocation that would likely follow,” said Moody’s.
“Should Greece leave the euro, posing a threat to the euro’s continued existence, Moody’s would review all euro area sovereign ratings, including those of the Aaa nations,” it said.
The triple-A eurozone countries under Moody’s ratings are Austria, France, Germany, Finland, Luxembourg, and Netherlands.
Moody’s said that a possible move by the region to help Spain recapitalize its banks could also affect Spain’s credit standing.
Such a rescue, which could take place on Saturday to the tune of 40 billion euros ($50 billion), according to diplomats, would possibly not add to Spain’s sovereign liabilities.
Even so, Moody’s said the country’s indirect reliance on European Central Bank funding via its banks has expanded recently.
“Moody’s is assessing the implications of these increased pressures and will take any rating actions necessary to reflect the risk to Spanish government creditors,” it said.
Spain’s current rating is A3 with a negative outlook, meaning it risks a downgrade if conditions worsen significantly.
Photo AFP/File, Joel Saget