EU debt summit fails to satisfy ratings agencies
By Walter Brandimarte
NEW YORK (Reuters) - Investors were bracing for a possible mass downgrade of euro zone countries as soon as this week after EU leaders failed to come up with decisive measures to tackle the region's debt crisis.
Moody's Investors Service said on Monday it intends to review the ratings of all 27 members of the European Union in the first quarter of 2012 after EU leaders offered "few new measures" to resolve the crisis in a summit on Friday.
Fitch Ratings said the summit, in which leaders agreed to draft a new treaty for deeper economic integration, failed to provide a "comprehensive" solution to the crisis, thus increasing short-term pressure on euro zone sovereign ratings.
Friday's historic agreement in Brussels between 26 European Union leaders to draft a new treaty for deeper integration in the euro zone gave a brief fillip to markets. But it did not last long as the announcements from both Moody's and Fitch compounded the selling in the fragile and increasingly illiquid pre-holiday market environment.
Standard & Poor's, which warned last week of a possible downgrade of 15 euro zone countries shortly after the summit, still has to announce its decision.
By placing these countries on credit watch negative -- which signals a possible imminent downgrade -- S&P said "systemic stresses" were building up as credit conditions tightened in the 17-nation region.
On Monday, S&P's chief economist Jean-Michel Six said time was running out for the currency bloc to resolve its debt problems.
"There is probably yet another shock required before everybody in the euro zone reads from the same page, for instance a major German bank experiencing some real difficulties on the markets, which is a genuine possibility in the near term," Six told a business conference in Tel Aviv. Continued...