Standard and Poor's put its long-term sovereign ratings on 15 of the 17 eurozone countries on credit watch with negative implications yesterday (December 5).  Cyprus and Greece were not included in the credit watch. Cyprus  is already on S&P's watch list, while the ratings on Greece have not been affected by the recent decision. Greece already has a CC rating, showing a relatively high near-term probability of default. Austria, Finland, France, Germany, Luxembourg and the Netherlands could all lose their AAA ratings in the coming weeks.

Standard and Poor's explained that the move was prompted by “our belief that systemic stresses in the eurozone have risen in recent weeks to the extent that they now put downward pressure on the credit standing of the eurozone as a whole.”  The ratings agency aims to complete the review soon after the December 8 and 9 EU summit and warn that “ratings could be lowered by up to one notch for Austria, Belgium, Finland, Germany, Netherlands, and Luxembourg, and by up to two notches for the other governments.”

Standard and Poor's gives what are described as five interrelated factors that are causing the systemic stresses in the eurozone: tightening credit conditions, higher risk premiums, disagreement amongst policy makers, high levels of government and household debt and the increasing risk of recession across the eurozone.

European stocks saw more turbulence following the announcement and analysts commented on the vulnerability of markets to the latest news concerning the eurozone.

Liam Lever, liam@romania-insider.com

(photo source: Sxc.hu)