Standard & Poor’s cut its long-term credit rating on the European Union to AA-plus from AAA on Friday, citing rising tensions on budget negotiations. The move follows cuts to the ratings of EU member states in recent months.
“In our opinion, the overall creditworthiness of the now 28 European Union (EU) member states has declined,” S&P said in a statement.
“In our view, EU budgetary negotiations have become more contentious, signaling what we consider to be rising risks to the support of the EU from some member states.”
S&P said cohesion among EU members had lessened and that some might baulk at funding the EU budget on a pro-rata basis.
S&P has had a negative outlook on the EU since January 2012 and has since cut its ratings on members France, Italy, Spain, Malta, Slovenia, Cyprus and The Netherlands.
The EU is not a sovereign but it can borrow in its own name. As of this month, it had outstanding loans of 56 billion euros ($76.5 billion), according to S&P.
The credit-rating agency said its downgrade of The Netherlands last month left the EU with six ‘AAA’-rated members. Since 2007, revenues contributed by ‘AAA’-rated sovereigns as a proportion of total EU revenues nearly halved to 31.6 percent, it added. [Reuters]