Moody's threatens to strip the EU of its triple A rating

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The Independent Online

The ratings agency Moody's heaped pressure on Europe's top central banker Mario Draghi to deliver a rescue plan for the region's strugglers yesterday after threatening to strip the entire European Union of its AAA credit rating.

The ratings agency has switched its outlook on the EU to negative – increasing chances of a slashed rating – to reflect the weaker creditworthiness of Germany, France, the Netherlands and the UK.

The intervention comes two days before Mario Draghi, the European Central Bank president, is due to set out bond-buying plans to ease the borrowing costs of Spain and Italy, which have been pushed towards an international bailout by soaring interest rates on their debts.

European leaders also stepped up their shuttle diplomacy with EU president Herman Van Rompuy heading to Berlin for talks with the German Chancellor Angela Merkel yesterday. Italy's Mario Monti is also hosting French president François Hollande at the beginning of what analysts describe as a "crunch month" for the eurozone.

Moody's said the gloomier prospects for Germany, France, the UK and the Netherlands, which together account for around 45 per cent of the EU budget revenue, were behind its action.

Germany, the Netherlands and Luxembourg have been on negative outlook since July, France and Austria since February and the UK since December last year. The rival agency Standard & Poor's stripped France of its AAA rating back in January.

Chris Scicluna, at Daiwa Capital Markets Europe, said: "The ratings of Germany, France, Netherlands and the UK all look pretty shaky. You would not want to rule out downgrades for all these member states in due course." Moody's said the EU credit score was "particularly sensitive" to the creditworthiness of its biggest contributors.

Germany's constitutional court is set to rule on whether the new €500bn (£397bn) European bailout pot is unconstitutional next week.