Standard & Poor’s Ratings Services has followed up its move to place most European sovereigns on credit watch with negative implications, by making the same move on a host of European banks, and the European Union itself.
The rating agency says that the credit watch placement is prompted by the similar credit watch placements on 15 eurozone sovereigns, and “is an expression of our concerns about the potential impact on the future debt service capacity of eurozone sovereigns, and therefore also the EU, in the context of what we view as deepening political, financial, and monetary problems within the eurozone.”
S&P notes that Eurozone members account for 62% of the EU’s total 2011 budgeted revenues, and given the EU’s dependency on revenues from national budgets, and the recent credit watch placements on the ratings of Germany and France, among others, it’s reviewing the ‘AAA’ long-term rating on the EU with the ratings on the eurozone member states.
Additionally, S&P has placed its ratings on some of the largest rated banking groups in the eurozone on credit watch with negative implications, and says that similar rating actions on other large banks in the eurozone will follow soon. S&P says it will resolve the credit watch placement on the banks soon after resolving the credit watch placement on the related sovereigns.