The European Union retains its AAA rating from S&P for now but Member EU States can Change That

Posted by PITHOCRATES - January 21st, 2012

Week in Review

Things may be bad for some individual members of the European Union (EU) but the EU as a whole is doing all right according to S&P (see S&P Affirms The European Union’s AAA Rating, Outlook Negative by Sam Ro posted 1/20/2012 on Business Insider).

S&P just affirmed the European Union’s AAA rating.  However, the outlook is negative.

This comes a week after S&P downgraded nine eurozone countries, including France and Austria.

And directly from the S&P press release.

The outlook is negative, in part reflecting the negative outlooks on 16 of the 27 member states of the EU…

During 2011, eurozone member states accounted for 62% of the EU’s total budgeted revenues; budgeted revenues from Germany and France were 30% of total EU revenues, at 16% and 14%, respectively. On Jan. 13, 2012, we lowered the ‘AAA’ long-term sovereign credit rating on France and Austria by one notch to ‘AA+’, and affirmed the long-term rating on Germany at ‘AAA’. As a consequence of the Jan. 13 downgrades, the pool of ‘AAA’ member states contributing to the EU’s revenues has declined to 33% of 2011 budgeted revenues, from 49%. Nevertheless, in our opinion, the supranational entity known as the EU benefits from multiple layers of debt-service protection sufficient to offset the current deterioration we see in member states’ creditworthiness. We are therefore affirming the long- and short-term issuer credit ratings on the EU at ‘AAA/A-1+’.

So everything is hunky-dory.  As long as France and Germany don’t go broke trying to bail out the Euro.  And with the Greek problem about to be resolved by screwing the private bondholders out of 70% of their investment the Eurozone should be right as rain.  As should the EU.

Of course, there are still more than half of the member EU states sucking air.  That could be a problem.  But why worry about that now when we can worry about that later?

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