Moody’s warns it may cut UK, France rating

Rating agency Moody's warned it may cut the triple-A ratings of France, Britain and Austria and it downgraded six other European nations including Italy, Spain and Portugal, citing growing risks from Europe's debt crisis.

Moody's move was less aggressive than rival agency Standard & Poor's, but its action puts London's prized top credit rating in jeopardy for the first time.

It said it was worried about Europe's ability to undertake the reforms needed to address the crisis and the amount of funds available to fight it. It also said the region's weak economy could undermine austerity drives by governments to fix their finances.

The euro and sterling fell after the announcement, with pound falling 0.4% to $1.5703 and the single currency dipping 0.3% to $1.3154. European and US equity index futures were also lower. The US rating agency said it changed the outlooks for the ratings of France, Britain and Austria to negative due to "a number of specific credit pressures that would exacerbate the susceptibility of these sovereigns' balance sheets."

Germany's top-tier rating was described as "appropriate" by Moody's, and it affirmed the triple-A rating on the euro zone's bailout fund, the European Financial Stability Fund (EFSF).

Bart Oosterveld, the managing director at Moody's sovereign risk group, declined to comment on the state of the negotiations between Athens and its creditors, but said that if Greece were to leave the European Union the impact on financial markets and credit ratings "would be quite profound." And he warned that European credit markets may still deteriorate despite efforts by the ECB to ease financing pressures with its three-year refinancing operations. The rating outlooks of nine countries affected by Moody's action was set to negative, "given the continuing uncertainty over financing conditions over the next few quarters and its impact on creditworthiness," Moody's said.

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