Moody’s cuts Germany’s outlook to negative

Moody’s has revised credit outlook of Germany to negative, raising the possibility of the economic major losing its coveted ‘Aaa’ rating amid worsening European debt turmoil.

Germany becomes the latest European economic power house this year after France to see its credit outlook being downgraded by the global credit rating agency.

The credit rating outlook of Germany, Luxembourg and the Netherlands have been lowered to negative, Moody’s Investors Service said yesterday.

The agency noted that rising uncertainty over European debt crisis and increased likelihood of Greece’s exit from the euro currency, have raised the risks to these three economies.

‘Aaa’ indicates the safest credit rating.

In a statement, Moody’s said the decision to change the outlooks to negative was driven by the view that the levels of uncertainty about outlook for the euro area, and the potential impact of plausible scenarios on member states, are no longer consistent with stable outlooks.

Moody’s has also weighed in the need for “greater collective support” for other euro area nations such as Spain and Italy.

“Given the greater ability to absorb the costs associated with this support, this burden will likely fall most heavily on more highly rated member states if the euro area is to be preserved in its current form,” it said.

Germany is the key force in fighting the region’s debt crisis, which is also impacting the overall global economy.

Moody’s now has negative outlook on four ‘Aaa’-rated European nations — Germany, the Netherlands, France and Austria. France and Austria saw their credit outlook lowered to negative on February 13, 2012.

Finland, with its stable outlook, is now the sole exception among Aaa-rated euro area sovereigns, Moody’s noted.

“By the end of the third quarter, Moody’s will also assess the implications of these developments for Aaa-rated Austria and France, whose rating outlooks were moved to negative from stable in February.

“Specifically, Moody’s will review whether their current rating outlooks remain appropriate or whether more extensive rating reviews are warranted,” the agency said.

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