Tag Archives: esm

London, 09 May 2014

Moody’s Investors Service has today upgraded Portugal’s government bond rating to Ba2 from Ba3. In addition, the rating agency placed the Ba2 rating on review for possible further upgrade.

The rating action was triggered by the following key factors:

  • Portugal’s fiscal situation has improved more rapidly than initially targeted and the public debt ratio will start declining this year, albeit from a very high level. The budget deficit was reduced a full percentage point of GDP more than envisaged last year, indicating the government’s strong commitment to fiscal consolidation.
  • The country will conclude its three-year EU/IMF support programme in the near future, without the need for a precautionary credit line from the European Stability Mechanism (ESM). Portugal has regained access to the public debt markets and in addition the government has built up sizeable cash buffers.
  • Portugal’s economic recovery is gaining momentum, with signs of broadening beyond exports, which continue to perform strongly. Moody’s believes that economic growth will be sustained over the medium-term because the Portuguese authorities have implemented a wide range of structural reforms.

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After more than three years of economic, financial, and budgetary stress in the European Economic and Monetary Union (eurozone), especially on its so-called “periphery”, some signs of stabilization emerged in the latter half of 2012. Is this a sign that the financial and economic troubles leading to the rating downgrades of 12 of the 17 eurozone member states since the onset of the crisis may have run their course? We believe that 2013 could be a watershed year for the eurozone debt crisis. It could mark the start of the region sustainably overcoming the market volatility and fragmentation that has affected it over the past few years. It could also see the return of some so-called “program countries”–member states that have borrowed from the European Stability Mechanism (ESM) or the European Financial Stability Facility multilateral loan programs–such as Ireland and Portugal, to more substantial primary issuance in the capital markets.

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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.

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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.

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