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Moody’s Investors Service has today downgraded the government of Russia’s sovereign debt rating to Ba1/Not Prime (NP) from Baa3/Prime-3 (P-3). The rating outlook is negative. This rating action concludes the review for downgrade that commenced on January 16, 2015.

Moody’s downgrade of Russia’s government bond rating to Ba1 is driven by the following factors:

  • The continuing crisis in Ukraine and the recent oil price and exchange rate shocks will further undermine Russia’s economic strength and medium-term growth prospects, despite the fiscal and monetary policy responses;
  • The government’s financial strength will diminish materially as a result of fiscal pressures and the continued erosion of Russia’s foreign exchange (FX) reserves in light of ongoing capital outflows and restricted access to international capital markets;
  • The risk is rising, although still very low, that the international response to the military conflict in Ukraine triggers a decision by the Russian authorities that directly or indirectly undermines timely payments on external debt service.

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London, 19 September 2014 — Moody’s Investors Service has today announced its decision to maintain the negative outlook on France’s government bond rating, which it has affirmed at Aa1.

The agency’s decision to affirm France’s Aa1 rating reflects Moody’s view that, despite negative credit pressures, the country retains significant credit strengths, including the size and wealth of the economy, as well as its affordable debt burden despite a continuous, gradual erosion of its economic and fiscal strength. The affirmation is also supported by renewed government commitment to accelerating the pace of structural reform, introducing a more consistent approach to economic policy, and proceeding with its budget saving plans.

That said, Moody’s decision to maintain a negative rating outlook reflects the rating agency’s view that the execution risks associated with implementing the government’s proposed structural reform initiatives are significant, given the strength of vested political interests that might oppose them and the poor track record in implementing such reforms.

In a related rating action, Moody’s has today announced its decision to maintain negative outlooks on the Aa1 ratings of Société de Financement de l’Economie Française (SFEF) and of Société de Prise de Participation de l’État (SPPE). The two entities’ Aa1 rating are affirmed, in line with the sovereign’s rating. Moody’s also affirmed the Prime-1 rating of SPPE, including its euro-denominated commercial paper programme. The senior debt instruments issued by the two entities are backed by unconditional and irrevocable guarantees from the French government.

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London, 01 August 2014

Moody’s Investors Service has today upgraded Greece’s government bond rating by two notches to Caa1 from Caa3. The outlook on the rating is stable. Greece’s short-term debt rating is unaffected and remains Not Prime (NP).

The rating action was triggered by the following key factors:

  • The significant improvement in Greece’s fiscal position over the past year and the rating agency’s view that the government remains committed to fiscal consolidation underpin Moody’s forecast of a gradual decline in the public debt to GDP ratio, which Moody’s expects to peak this year and then start to fall from 2015.
  • The improvement in Greece’s economic outlook, based on both a cyclical recovery and the progress made in implementing structural reforms and rebalancing the economy, further supports the downward trajectory of the public debt ratio.
  • The government’s reduced interest burden and lengthened maturities of the debt, which is predominantly owed to official creditors, adds to fiscal flexibility and reduces refinancing risks.

Concurrently, Moody’s has raised the local and foreign-currency country ceilings for long-term debt and deposits to Ba3 from B3. The foreign-currency country ceilings for short-term debt and deposits remains Not Prime (NP).

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New York, May 16, 2014

Moody’s Investors Service has today upgraded Ireland’s rating by two notches to Baa1 from Baa3. At Baa1, the outlook is stable. Concurrently, the short-term rating has been upgraded to P-2 from P-3.

The key drivers of the upgrade of Ireland’s rating are the following:

  • A step change in future debt levels. Moody’s expects that the recent pick-up in Ireland’s growth momentum will speed up ongoing fiscal consolidation and put the government’s debt metrics on a steeper downward path than previously anticipated, leading to a significantly improved outlook for Ireland’s medium-term public debt trajectory.
  • Very sharp reduction in off-balance sheet exposures. The recovery in the Irish property market has resulted in a considerable recent reduction in government contingent liabilities, due both to the accelerated asset sales of Ireland’s National Asset Management Agency (NAMA) and to the disposal of the Irish Bank Resolution Corporation (IBRC) portfolio.
  • Improved credit position relative to peers. Compared to other Baa-rated euro area sovereigns, including Italy (Baa2 stable) and Spain (Baa2 positive), Ireland’s credit profile is recovering more quickly from the euro area debt crisis as a result of its economy’s dynamism and growth prospects. This assessment informs the two-notch upgrade, repositioning the rating at the top of Ireland’s scorecard-implied rating range.

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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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Frankfurt am Main, March 14, 2014

Moody’s Investors Service has today changed the outlook to stable from negative on the European Union’s (EU) Aaa rating. Concurrently, Moody’s has affirmed its Aaa/(P)Prime-1 ratings.

The key drivers of today’s outlook change are as follows:

  1. The improvement in the creditworthiness of the EU’s largest shareholders, which it depends on for additional support in high stress scenarios.
  2. Diminishing risks emanating from the euro area debt crisis, which alleviates pressure on asset quality.

The key drivers for today’s affirmation of the EU’s Aaa/(P)P-1 ratings are:

  1. The joint and several liability of member states with regard to their obligations to the EU.
  2. The EU’s multi-layer debt-service protection.
  3. The EU’s conservative budget management.

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London, 07 March 2014

Moody’s Investors Service has today changed the outlook on Belgium’s Aa3 government bond rating to stable from negative. Concurrently, Moody’s has affirmed Belgium’s Aa3/P-1 ratings.

The key drivers of today’s outlook change are as follows:

  1. Diminished risks that Belgium’s government balance sheet will be affected by a further crystallisation of contingent liabilities from the banking sector.
  2. Moody’s expectation that fiscal consolidation will continue and support a reversal in government debt at around 100% of GDP in 2014-15.

Moody’s affirmation of Belgium’s Aa3 rating balances the following two considerations:

  1. The robustness of its economy with limited external imbalances backed by strong institutions; and
  2. Still high government debt, which is expected to diminish only gradually over the medium term.

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