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Standard & Poor's Puts Ratings On Eurozone Sovereigns On CreditWatch With Negative Implications

Publication date: 05-Dec-2011 16:27:24 EST


FRANKFURT (Standard & Poor's) Dec. 5, 2011--Standard & Poor's Ratings Services 
today placed its long-term sovereign ratings on 15 members of the European 
Economic and Monetary Union (EMU or eurozone) on CreditWatch with negative 
implications. 

We have also maintained the CreditWatch negative status of our long-term 
rating on Cyprus and placed its short-term ratings on CreditWatch with 
negative implications. The ratings on Greece have not been placed on 
CreditWatch. The ratings on the eurozone sovereigns are listed below. 

Today's CreditWatch placements are prompted by our belief that systemic 
stresses in the eurozone have risen in recent weeks to the extent that they 
now put downward pressure on the credit standing of the eurozone as a whole.

We believe that these systemic stresses stem from five interrelated factors:

(1) Tightening credit conditions across the eurozone;

(2) Markedly higher risk premiums on a growing number of eurozone sovereigns, 
including some that are currently rated 'AAA';

(3) Continuing disagreements among European policy makers on how to tackle the 
immediate market confidence crisis and, longer term, how to ensure greater 
economic, financial, and fiscal convergence among eurozone members;

(4) High levels of government and household indebtedness across a large area 
of the eurozone; and 

(5) The rising risk of economic recession in the eurozone as a whole in 2012. 
Currently, we expect output to decline next year in countries such as Spain, 
Portugal and Greece, but we now assign a 40% probability of a fall in output 
for the eurozone as a whole.

Our CreditWatch review of eurozone sovereign ratings will focus on three of 
the five key factors that form the core of our sovereign ratings methodology: 
the "political," "external," and "monetary" scores we assign to the 
governments in the eurozone (see "Sovereign Government Rating Methodology And 
Assumptions", published June 30, 2011). Our analysis of "political dynamics" 
will focus on both country-specific and eurozone-wide issues that appear to us 
to be limiting the effectiveness of efforts to resolve the market confidence 
crisis. Our analysis of "external liquidity" will focus on the borrowing 
requirements of both eurozone governments and banks. Our analysis of "monetary 
flexibility" will focus on ECB policy settings to address the economic and 
financial stresses the countries in the eurozone are increasingly facing.   

We expect to conclude our review of eurozone sovereign ratings as soon as 
possible following the EU summit scheduled for Dec. 8 and 9, 2011. Depending 
on the score changes, if any, that our rating committees agree are appropriate 
for each sovereign, we believe that ratings could be lowered by up to one 
notch for Austria, Belgium, Finland, Germany, Netherlands, and Luxembourg, and 
by up to two notches for the other governments.  

Our ratings on Greece (Hellenic Republic; CC/Negative/C) are not affected by 
today's actions, as a 'CC' rating under our rating definitions connotes our 
belief that there is a relatively high near-term probability of default.

We are publishing separate media releases with the rationale for each rating 
action on the 16 CreditWatch actions. We are also publishing the following 
article: "Credit FAQ: Factors Behind Our Placement of Eurozone Governments on 
CreditWatch".

Following today's CreditWatch listings, Standard & Poor's will issue separate 
media releases concerning affected ratings on the funds, government-related 
entities, financial institutions, insurance companies, public finance, and 
structured finance sectors in due course.
  

RATINGS LIST             To                   From

Long-term ratings on CreditWatch negative

Austria (Republic of)
Sovereign Credit Rating  AAA/Watch Neg/A-1+   AAA/Stable/A-1+
Belgium (Kingdom of)
Sovereign Credit Rating   AA/Watch Neg/A-1+    AA/Negative/A-1+

Finland (Republic of)
Sovereign Credit Rating   AAA/Watch Neg/A-1+   AAA/Stable/A-1+

France (Republic of)
Sovereign Credit Rating   AAA/Watch Neg/A-1+   AAA/Stable/A-1+

Germany (Federal Republic of)
Sovereign Credit Rating   AAA/Watch Neg/A-1+   AAA/Stable/A-1+

Luxembourg (Grand Duchy of)
Sovereign Credit Rating   AAA/Watch Neg/A-1+   AAA/Stable/A-1+

Netherlands (The) (State of)
Sovereign Credit Rating   AAA/Watch Neg/A-1+   AAA/Stable/A-1+


Long- and short-term ratings on CreditWatch negative

Estonia (Republic of)
Sovereign Credit Rating   AA-/Watch Neg/A-1+   AA-/Stable/A-1+

Ireland (Republic of)
Sovereign Credit Rating   BBB+/Watch Neg/A-2   BBB+/Stable/A-2

Italy (Republic of)
Sovereign Credit Rating   A/Watch Neg/A-1      A/Negative/A-1  

Malta (Republic of)
Sovereign Credit Rating   A/Watch Neg/A-1      A/Stable/A-1

Portugal (Republic of)
Sovereign Credit Rating   BBB-/Watch Neg/A-3   BBB-/Negative/A-3

Slovak Republic
Sovereign Credit Rating   A+/Watch Neg/A-1     A+/Positive/A-1

Slovenia (Republic of)
Sovereign Credit Rating   AA-/Watch Neg/A-1+   AA-/Stable/A-1+
     
Spain (Kingdom of)   
Sovereign Credit Rating   AA-/Watch Neg/A-1+   AA-/Negative/A-1+


Short-term ratings on CreditWatch negative, long-term ratings still on 
CreditWatch negative

Cyprus (Republic of)
Sovereign Credit Rating   BBB/Watch Neg/A-3    BBB/Watch Neg/A-3

RELATED CRITERIA AND RESEARCH

The ratings on France, Germany, The Netherlands, Italy, and Belgium are 
unsolicited. 

Complete ratings information is available to subscribers of RatingsDirect on 
the Global Credit Portal at www.globalcreditportal.com. All ratings affected 
by this rating action can be found on Standard & Poor's public Web site at 
www.standardandpoors.com. Use the Ratings search box located in the left 
column.  Alternatively, call one of the following Standard & Poor's numbers: 
Client Support Europe (44) 20-7176-7176; London Press Office (44) 
20-7176-3605; Paris (33) 1-4420-6708; Frankfurt (49) 69-33-999-225; Stockholm 
(46) 8-440-5914; or Moscow 7 (495) 783-4009.
Primary Credit Analysts:Moritz Kraemer, Frankfurt (49) 69-33-99-9249;
moritz_kraemer@standardandpoors.com
Frank Gill, London (44) 20-7176-7129;
frank_gill@standardandpoors.com
Additional Contact:Sovereign Ratings;
SovereignLondon@standardandpoors.com

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