Moody’s Affirms Italy Baa2; Negative Outlook

Frankfurt am Main, April 26, 2013

Moody’s Investors Service has today affirmed Italy’s Baa2 long-term government bond ratings, and is maintaining the negative outlook. In addition, Moody’s has also affirmed Italy’s Prime-2 short-term debt rating.

The key factors for maintaining the negative outlook are:

• Italy’s subdued economic outlook as a result of weak domestic and external demand (especially from its EU trading partners) and a slow pace of improvement in unit labour costs relative to other peripheral countries.
• The negative outlook on Italy’s banking system, which is characterised by weak profitability, a deterioration of asset quality and restricted access to market funding, and which indirectly raises the cost of funding for small and medium-sized enterprises (SMEs).
• The elevated risk that the Italian sovereign might lose investor confidence and, ultimately, access to private debt markets as a result of the political stalemate and the resulting uncertainty over future policy direction, as well as contagion risk from events in other peripheral countries.

The key factors behind the affirmation of Italy’s Baa2 rating are:

• Low funding costs, which, if sustained, buy time for the government to implement reforms and for growth to resume.
• The government’s primary surplus, which increases the likelihood that Italy’s debt burden will be sustainable, despite the expectation of low medium-term growth in nominal GDP.
• Economic resiliency, which is supported by the country’s large diversified economy, the relatively low indebtedness of its private sector and the likely availability of financial support, if needed, from euro area members given Italy’s fiscal consolidation progress in recent years and Italy’s systemic importance for the euro area.

Moody’s downgrades UK to Aa1

London, 22 February 2013

Moody’s Investors Service has today downgraded the domestic- and foreign-currency government bond ratings of the United Kingdom by one notch to Aa1 from Aaa. The outlook on the ratings is now stable.

The key interrelated drivers of today’s action are:

1. The continuing weakness in the UK’s medium-term growth outlook, with a period of sluggish growth which Moody’s now expects will extend into the second half of the decade;

2. The challenges that subdued medium-term growth prospects pose to the government’s fiscal consolidation programme, which will now extend well into the next parliament;

3. And, as a consequence of the UK’s high and rising debt burden, a deterioration in the shock-absorption capacity of the government’s balance sheet, which is unlikely to reverse before 2016.

mooody’s assigns ‘aa1′ to esm, outlook negative

Frankfurt am Main, December 06, 2012

Moody’s Investors Service has today assigned a provisional (P)Aa1 long-term rating and a provisional (P)Prime-1 short-term rating to the debt issuance programme of the European Stability Mechanism (ESM), in line with the ESM’s issuer ratings of Aa1 and Prime-1.

The outlook on the long-term programme rating is negative, in line with the outlook on the long-term issuer rating. Notes issued under the programme will constitute senior unsecured direct and unconditional obligations of the issuer.

The (P)Aa1/(P)Prime-1 ratings are based on the following factors:

• The ESM’s anticipated low leverage: the ESM has a maximum lending capacity of EUR500 billion, which is backed by subscribed capital of EUR700 billion.
• The creditworthiness of the ESM’s members which are also the euro area member states: the ESM has a weighted median shareholder rating of Aa1 (changed from Aaa further to the downgrade of France’s government bond rating to Aa1).
• The sound liquidity and capital management policy, which benefits from an Early Warning System (EWS) that ensures that funds will be available on time.
• The ESM’s preferred creditor status.

The ESM’s purpose is to provide an inter-governmental support mechanism which extends financial assistance to members that are either unable to access the capital markets, or able to do so only at very high interest rates.

MOODY’S DOWNGRADES ESM TO Aa1 FROM Aaa, EFSF TO (P)Aa1 FROM Aaa

Frankfurt am Main, November 30, 2012

Moody’s Investors Service has today downgraded the long-term issuer rating of the European Stability Mechanism (ESM) to Aa1 from Aaa, and is maintaining a negative outlook on the rating. At the same time, Moody’s has also downgraded the provisional long-term rating for the Issuer Rating and debt issuance programme of the European Financial Stability Facility (EFSF) to (P)Aa1 from P(Aaa), and is also maintaining a negative outlook. The short-term issuer rating of the ESM remains unchanged at Prime-1, while the provisional short-term rating of the EFSF remains at (P)Prime-1.

Moody’s downgrades France to Aa1 from Aaa

Frankfurt am Main, November 19, 2012

Moody’s Investors Service has today downgraded France’s government bond rating by one notch to Aa1 from Aaa. The outlook remains negative.

Today’s rating action follows Moody’s decision on 23 July 2012 to change to negative the outlooks on the Aaa ratings of Germany, Luxembourg and the Netherlands. At the time, Moody’s also announced that it would assess France’s Aaa sovereign rating and its outlook, which had been changed to negative on 13 February 2012, to determine the impact of the elevated risk of a Greek exit from the euro area, the growing likelihood of collective support for other euro area sovereigns and stalled economic growth. Today’s rating action concludes this assessment.

Moody’s decision to downgrade France’s rating and maintain the negative outlook reflects the following key interrelated factors: