The Standard and Poor’s ratings agency yesterday downgraded the EU’s long-term credit rating one notch, from “AAA” to “AA+”, citing weaker credit worthiness among the bloc.
“The downgrade ... reflects our view of weaker creditworthiness among the 28 EU member states, including among net creditors to the EU’s budget,” the agency said.
“We consider that the EU’s financial arrangements have deteriorated, and that cohesion among members has lessened.”
The outlook was stable, it said.
The downgrade came as EU leaders held a summit in Brussels to try and work out an agreement on deeper economic reforms and defense policy after striking a landmark banking union deal.
Satisfied with a banking union deal that would result in one of the biggest handovers of sovereignty to the EU since the creation of the euro currency, leaders meeting in Brussels put off plans for the next step in tighter economic policy coordination until late next year.
The landmark bank regulation deal includes a single body to police and wind up ailing banks, backed by a fund paid for by the banks themselves to avoid using taxpayer money.
The banking union is seen as a means to ensure stability in the eurozone, and proponents also hope it will help facilitate much-needed growth and jobs by getting the banks to lend freely again.
With fragile growth of just 1.1 percent and a stubbornly high unemployment rate of 12.2 percent expected for next year, the eurozone is badly in need of a boost.