Moody's Investors Service has warned Germany, the Netherlands and Luxembourg that they may lose their coveted triple-A credit ratings due to intensified uncertainty regarding the outcome of the debt crisis.
The agency cut the outlook on the sovereigns' Aaa rating to 'negative' from 'stable' and said the revision is driven by its view that the level of uncertainty about the outlook for the euro area and the potential impact of plausible scenarios on member states are no longer consistent with 'stable' outlooks.
Moody's said the risk of a Greek exit from the euro area has increased relative to its expectations earlier this year. A Greek exit from the monetary union would pose a material threat to the euro, it warned.
Moody's said these sovereigns are impacted by the "rising uncertainty regarding the outcome of the euro area debt crisis and the increased susceptibility to event risk stemming from the likelihood of Greek exit, including the broader impact that such an event would have on euro area members, particularly Spain and Italy"
Greece's international creditors will return to Athens on Tuesday to assess the progress of the planned fiscal reforms. Speculations are rife that the country will not be able to meet its deficit targets and the troika may refuse further financial aid.
Reports suggest that in such a case, Greece will likely default in September. Also, Greece faces an August 20 deadline to repay around 3 billion euros to the European Central Bank.
Moody's said even if euro area policymakers succeed in avoiding a Greek exit, there is an increasing likelihood that greater collective support for Eurozone countries like Spain and Italy will be required. This burden will likely fall most heavily on more highly rated member states, it added.
Moody's, at the same time, affirmed the Aaa rating and 'stable' outlook on Finland's government bond rating, though the euro crisis posed considerable challenges to its public finances.
According to Moody's, the factors that led to the affirmation of the rating included the Finnish government's net creditor position, with accumulated government pension assets exceeding the government's gross financial liabilities, its fiscally conservative budgetary policies and the country's relatively healthy and domestically oriented banking system.
Meanwhile on Monday, Spain and Italy introduced a ban on short-selling to curb speculative trading amid escalating concerns over the debt crisis. However, France said it has no such plans as the "current situation does not warrant it."
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