You know there is a reason why Europe just came crawling with an advance handout looking for US assistance: Moody's just went apeshit on Europe. In other news, we wouldn't want to be the company that insured Moody's Milan offices.
Full release:
Moody's adjusts ratings of 9 European sovereigns to capture downside risks
As anticipated in November 2011, Moody's Investors Service has today adjusted the sovereign debt ratings of selected EU countries in order to reflect their susceptibility to the growing financial and macroeconomic risks emanating from the euro area crisis and how these risks exacerbate the affected countries' own specific challenges.
Moody's actions can be summarised as follows:
- Austria: outlook on Aaa rating changed to negative
- France: outlook on Aaa rating changed to negative
- Italy: downgraded to A3 from A2, negative outlook
- Malta: downgraded to A3 from A2, negative outlook
- Portugal: downgraded to Ba3 from Ba2, negative outlook
- Slovakia: downgraded to A2 from A1, negative outlook
- Slovenia: downgraded to A2 from A1, negative outlook
- Spain: downgraded to A3 from A1, negative outlook
- United Kingdom: outlook on Aaa rating changed to negative
Please see the individual country specific statements below for more detailed information relating to the rating rationale and the sensitivity analysis for each affected sovereign issuer.
The implications of these actions for directly and indirectly related ratings will be reported through separate press releases.
The main drivers of today's actions are:
- The uncertainty over (i) the euro area's prospects for institutional reform of its fiscal and economic framework and (ii) the resources that will be made available to deal with the crisis.
- Europe's increasingly weak macroeconomic prospects, which threaten the implementation of domestic austerity programmes and the structural reforms that are needed to promote competitiveness.
- The impact that Moody's believes these factors will continue to have on market confidence, which is likely to remain fragile, with a high potential for further shocks to funding conditions for stressed sovereigns and banks.
To a varying degree, these factors are constraining the creditworthiness of all European sovereigns and exacerbating the susceptibility of a number of sovereigns to particular financial and macroeconomic exposures.
Moody's has reflected these constraints and exposures in its decision to downgrade the government bond ratings of Italy, Malta, Portugal, Slovakia, Slovenia and Spain as listed above. The outlook on the ratings of these countries remains negative given the continuing uncertainty over financing conditions over the next few quarters and its corresponding impact on creditworthiness.
In addition, these constraints have also prompted Moody's to change to negative the outlooks on the Aaa ratings of Austria, France and the United Kingdom. The negative outlooks reflect the presence of a number of specific credit pressures that would exacerbate the susceptibility of these sovereigns' balance sheets, and of their ongoing austerity programmes, to any further deterioration in European economic conditions and financial landscape.
An important factor limiting the magnitude of Moody's rating adjustments is the European authorities' commitment to preserving the monetary union and implementing whatever reforms are needed to restore market confidence. These rating actions therefore take into account the steps taken by euro area policymakers in agreeing to a framework to improve fiscal planning and control and measures adopted to stem the risk of contagion.
The rating agency considers the ratings of the following European sovereigns to be appropriately positioned, namely Denmark (Aaa), Finland (Aaa), Germany (Aaa), Luxembourg (Aaa), Netherlands (Aaa), Sweden (Aaa), Belgium (Aa3), Estonia (A1) and Ireland (Ba1). Moody's review of Cyprus' Baa3 rating, as announced in November 2011, is ongoing, while the developing outlook on Greece's Ca rating remains appropriate as the rating agency awaits clarification on the country's debt restructuring.
As for Central and Eastern European sovereigns outside the euro area, Moody's will be assessing the credit implications of the fragile financial market conditions and weak macroeconomic outlook during the first half of this year.
In related rating actions, Moody's has today also downgraded the rating of Malta Freeport Co. to A3 from A2, and that of Spain's Fondo de Reestructuración Ordenada Bancaria (FROB) to A3 from A1. Both of these issuers are government-guaranteed entities and therefore have a negative outlook in line with the outlook on their respective sovereign. Moody's has today also changed the outlook on the Aaa debt rating of the Bank of England to negative, in parallel with its decision to change the outlook on the UK's sovereign rating. Similarly, Moody's has changed to negative the outlook on the Aaa debt ratings of the Société de Financement de l'Economie Française (SFEF) and the Société de Prise de Participation de l'Etat (SPPE) in line with the change of outlook on France's sovereign rating.
The principal methodology used in these ratings was Sovereign Bond Ratings Methodology published in September 2008. Please see the Credit Policy page on www.moodys.com [43] for a copy of this methodology.
Moody's changes the outlook on Austria's Aaa rating to negative
Moody's Investors Service has today changed the outlook on the Aaa rating of the Republic of Austria to negative from stable. Concurrently, Moody's has affirmed Austria's short-term debt rating of Prime-1.
The key drivers of today's action on Austria are:
1.) The uncertainty over the prospects for institutional reform in the euro area and the weak macroeconomic outlook across the region, which will continue to weigh on already fragile market confidence.
2.) The balance sheet of the Austrian government is exposed to larger contingent liabilities than is the case for other Aaa-rated sovereigns in the EU, mainly on account of the relatively large size of Austria's banking sector, its substantial exposure to the more volatile economies in Central and Eastern Europe and the reliance of the banks on wholesale funding markets. The stand-alone credit strength of the Austrian banking sector is low for a Aaa-rated sovereign.
3.) While the concerns over the banking sector are not new, Austria's debt metrics are weaker today than they were in 2008-2009, the last time that the Austrian government provided support to its banks. The Austrian government's debt metrics are also weaker than some of those of other Aaa-rated peers.
RATIONALE FOR NEGATIVE OUTLOOK
As indicated in the introduction of this press release, a contributing factor underlying Moody's decision to change the outlook on Austria's Aaa bond rating to negative is the uncertainty over the euro area's prospects for institutional reform of its fiscal and economic framework and over the resources that will be made available to deal with the crisis. Moreover, Europe's weak macroeconomic prospects complicate the implementation of domestic austerity programmes and the structural reforms that are needed to promote competitiveness. Moody's believes that these factors will continue to weigh on market confidence, which is likely to remain fragile, with a high potential for further shocks to funding conditions for stressed sovereigns and banks.
While constraining the creditworthiness of all European sovereigns, the fragile financial environment increases Austria's susceptibility to financial shocks. Moody's decision to change the outlook to negative reflects the large contingent liabilities to which the Austrian sovereign is exposed, given the relatively large size of its banking sector and in particular its exposure to the Central, Eastern and South-Eastern European (CESEE) region. According to the Austrian banking regulator FMA, total consolidated assets of Austria's banks amounted to 390% of Austria's GDP in Q3 2011 and their exposure to the CESEE region remains elevated at EUR225 billion, or 75% of GDP, as of September 2011 (see OeNB Financial Stability Report, December 2011). Moody's notes that the stand-alone credit strength of the Austrian banking sector is low compared with the banking sectors of other Aaa-rated sovereigns.
The decision to assign a negative outlook mainly reflects Moody's lower "tolerance" for high levels of contingent liabilities at the very high end of the rating spectrum, rather than concerns over a further increase in the government's potential exposure. Austrian banks' capitalisation levels are lower than they are in other Aaa-rated countries, and their business models continue to exhibit higher risks than those of banks in most of Austria's peers. This was acknowledged by Austria's central bank in its latest Financial Stability Report (published in December 2011).
Moody's acknowledges the active attempts by the Austrian banking regulator to reduce the country's exposure by requiring the Austrian banks that operate in the region to reduce the funding mismatch that is prevalent in some of the countries. However, we believe that this reduction will most likely happen only gradually over the next few years. In the meantime, a potential further downturn in the CESEE region (for example, from contagion from a further deterioration of economic and financial conditions in the euro area) could generate considerably higher capital and funding support needs, which Moody's would deem to be incompatible with the Austrian government maintaining its Aaa rating.
The third factor underpinning the outlook change is Austria's weakened public debt metrics compared with some of the other Aaa-rated peers. Austria's debt metrics are not as strong as they were in 2008/09, the last time that the Austrian government provided support to its banks. Austria's public debt ratio stood at around 75% of GDP in 2011, which is significantly above the median debt ratio for all Aaa-rated sovereigns of around 52% of GDP. This estimate includes the full debt of the government-related issuer OeBB Infrastruktur (EUR17 billion as of end-2011). Even under base case assumptions, Moody's expects Austria's debt ratio to rise to around 80% of GDP in 2013, an increase of 20 percentage points compared to 2007, and to decline only gradually thereafter.
The upward trajectory of Austria's outstanding debt places it amongst the most heavily indebted of its Aaa-rated peers, alongside the United States, France and the United Kingdom whose Aaa ratings also carry a negative outlook.
RATIONALE FOR UNCHANGED Aaa RATING
Austria's Aaa rating is supported by the country's strong, diversified economy with no major private sector or external imbalances to correct. Growth performance has been strong by comparison with other European economies, unemployment is low, the current account has been in surplus since 2002 and the leverage of the private sector is moderate. Austria has a good track record of achieving and maintaining low budget deficits, recording a budgetary shortfall of above 2.5% of GDP only once in the period of 1997 to 2009. The deficit outturn in 2011 was better than budgeted, with a deficit of 3.3% of GDP (versus an expected 3.9% budget shortfall) due to much stronger revenue growth and very strict monitoring of spending. This compares favourably with the budgetary performance of some of the other Aaa-rated peers. However, given the expected slowdown in growth across the euro area in 2012, Moody's is not expecting the Austrian government to make any material progress in reducing the fiscal deficit, which will in turn keep the debt ratio on an upward trajectory. Moody's acknowledges the government's recently presented fiscal consolidation package which aims to bring the budget deficit to zero by 2016. While the accelerated fiscal consolidation is welcome, Moody's notes that Austria's debt ratio will remain above 70% of GDP in 2016, even assuming full implementation of all the proposed measures.
WHAT COULD MOVE THE RATING DOWN
The Austrian government's bond rating could potentially be downgraded to Aa1 if further material government support were needed to support the country's banking sector. A sharp intensification of the euro area crisis and further deterioration of macroeconomic conditions in Europe, leading to material fiscal and debt slippage in Austria, could also pressure the rating.
Conversely, the outlook on the sovereign Aaa rating could be returned to stable if government contingent liabilities were materially reduced, for example, by a further significant strengthening of the banking sector's capital base through private sector capital or organic capital growth, so as to remove any doubt about the need for future public sector support.
Moody's changes the outlook on France's Aaa rating to negative
Moody's Investors Service has today changed the outlook on the Aaa rating of France's local- and foreign-currency government debt to negative from stable.
The key drivers of today's outlook change on France are:
1.) The uncertainty over the prospects for institutional reform in the euro area and the weak macroeconomic outlook across the region, which will continue to weigh on already fragile market confidence.
2.) The ongoing deterioration in France's government debt metrics, which are now among the weakest of France's Aaa-rated peers.
3.) The significant risks to the French government's ability to achieve its fiscal consolidation targets, which could be further complicated by a need to support other European sovereigns or its own banking system.
Concurrently, Moody's has today also changed to negative the outlook on the Aaa debt ratings of the Société de Financement de l'Economie Française (SFEF) and the Société de Prise de Participation de l'Etat (SPPE) in line with the change of outlook on France's sovereign rating.
RATIONALE FOR NEGATIVE OUTLOOK
As indicated in the introduction of this press release, a contributing factor underlying Moody's decision to change the outlook on France's Aaa government bond rating to negative is the uncertainty over the euro area's prospects for institutional reform of its fiscal and economic framework and over the resources that will be made available to deal with the crisis. Moreover, Europe's weak macroeconomic prospects complicate the implementation of domestic austerity programmes and the structural reforms that are needed to promote competitiveness. Moody's believes that these factors will continue to weigh on market confidence, which is likely to remain fragile, with a high potential for further shocks to funding conditions. In addition to constraining the creditworthiness of all European sovereigns, the fragile financial environment increases France's susceptibility to financial and macroeconomic shocks given the concerns identified below.
The second driver underpinning the negative outlook is the ongoing deterioration in France's government debt metrics, which are now among the weakest of France's Aaa peers. France's primary balance is in deficit and compares unfavourably with other Aaa-rated countries with a stable outlook. The upward trajectory of France's outstanding debt over the decade preceding the crisis, at a time when most other governments were reducing their debt ratios, places it amongst the most heavily indebted of its Aaa-rated peers, alongside the United States and the United Kingdom whose Aaa ratings also carry a negative outlook. France's capacity to support higher government debt levels is also complicated by the limitations of operating without the advantage of being the single "risk-free" issuer of debt denominated in its currency.
The third driver of today's announced action is the significant risk attached to the government's medium-term ability to implement consolidation targets and achieve a stabilisation and reversal in its public debt trajectory. While the rating agency acknowledges the French government's efforts to implement important economic and fiscal reforms since 2008, and meet fiscal targets over the past two years, the agency notes that France's prior reluctance to decisively reform and consolidate have left its finances in a challenging position amid an ongoing global financial and euro area debt crisis. Stabilising, and ultimately reducing, France's stock of outstanding debt will be contingent on the French government maintaining its fiscal consolidation effort. Meanwhile, the fragile financial market environment, which will endure for many months to come, constrains the French government's room to manoeuvre in terms of stretching its balance sheet in the face of further direct challenges to its finances -- for example, from the possible need to provide support to other European sovereigns or to its own banking system, both of which would further complicate its own fiscal consolidation process.
RATIONALE FOR UNCHANGED Aaa RATING
France's Aaa rating is supported by the economy's large size, high productivity and broad diversification, together with high private sector savings and relatively moderate household and corporate liabilities. This provides considerable capacity to absorb shocks, as demonstrated by the resilience of domestic demand during the 2008-2009 global crisis. The ability of the French government to finance its very high debt level at affordable interest rates in an uncertain financial and economic environment will be crucial to it retaining its Aaa rating.
WHAT COULD MOVE THE RATING DOWN
Moody's would downgrade France's government debt rating in the event of an unsuccessful implementation of economic and fiscal policy measures, leading to failure of the government's attempt to stabilise and reverse the high public debt ratio, generating a further weakening of the debt metrics against peers and further reducing France's resiliency to potential economic and financial shocks. A material increase in exposure to contingent liabilities from the national banking system or a requirement for further support to neighbouring euro area member states if the euro area crisis were to intensify could also prompt a rating downgrade.
A return to a stable outlook on France's sovereign rating would require significant progress towards improving the debt metrics and an easing of the euro area sovereign crisis given Moody's concerns regarding the country's exposure to contingent liabilities.
Moody's downgrades Italy's government bond rating to A3 from A2, negative outlook
Moody's Investors Service has today downgraded the Italian government's local- and foreign-currency debt rating to A3 from A2. The outlook remains negative. Concurrently, Moody's has downgraded the country's short-term rating to Prime-2 from Prime-1.
The key drivers of today's rating action on Italy are:
1.) The uncertainty over the prospects for institutional reform in the euro area and the weak macroeconomic outlook across the region, which will continue to weigh on already fragile market confidence.
2.) The challenges facing Italy's public finances, especially its large stock of debt and high cost of funding, as well as the country's deteriorating macroeconomic outlook.
3.) The significant risk that Italy's government may not achieve its consolidation targets and address its public debt given the country's pronounced structural economic weakness.
Moody's is maintaining a negative outlook on Italy's sovereign rating to reflect the potential for a further decline in economic and financing conditions as a result of a deterioration in the euro area debt crisis.
RATIONALE FOR DOWNGRADE
As indicated in the introduction of this press release, a contributing factor underlying Moody's one-notch downgrade of Italy's government bond rating is the uncertainty over the euro area's prospects for institutional reform of its fiscal and economic framework and over the resources that will be made available to deal with the crisis. Moreover, Europe's weak macroeconomic prospects complicate the implementation of domestic austerity programmes and the structural reforms that are needed to promote competitiveness. Moody's believes that these factors will continue to weigh on market confidence, which is likely to remain fragile, with a high potential for further shocks to funding conditions. In addition to constraining the creditworthiness of all European sovereigns, the fragile financial environment increases Italy's susceptibility to financial and macroeconomic shocks given the concerns identified below.
The deteriorating macroeconomic environment is in turn exacerbating a number of Italy's own challenges that are weighing on its creditworthiness and constitute the second driver of Moody's one-notch downgrade of Italy's bond rating. The multiple structural measures introduced by the government to promote economic growth will take time to yield results, which are difficult to predict at this stage. Moreover, the recent volatility in funding conditions for the Italian sovereign remains a risk factor that needs to be reflected in the government bond rating. Overall, the combination of a large debt stock (equivalent to 120% of GDP) and low medium-term economic growth prospects makes Italy susceptible to volatility in market sentiment that results in increased debt-servicing costs.
The third driver of today's rating action is the significant risk that the Italian government may not achieve its consolidation targets and prove unable to reduce the large stock of outstanding public debt. Moody's acknowledges that the new Italian government's fiscal consolidation and economic reform efforts have helped to maintain a primary surplus. The government has targeted primary surpluses in excess of 5% in the coming years. However, in an environment of pronounced regional economic weakness, the Italian government faces considerable challenges in generating the high primary surpluses required to compensate for higher interest payments and ultimately reduce its outstanding public debt.
These credit pressures have intensified and become more apparent in the period since Moody's last rating action on Italy in September 2011, and are contributing to the need to reposition Italy's rating at the lower end of the 'A' range.
The decision to downgrade Italy's debt rating also reflects Moody's view that Italy's credit fundamentals and vulnerabilities due to its high debt burden are difficult to reconcile with a rating above the lower end of the "single-A" rating category. Indeed, peers at the top of the single-A category (like the Czech Republic and South Korea) as well as those in the middle of the category (like Poland), do not face Italy's high debt and structural growth challenges.
WHAT COULD MOVE THE RATING UP/DOWN
Italy's government debt rating could be downgraded further in the event of evidence of persistent economic weakness, reform implementation difficulties, or increased political uncertainty, which translate into a significant postponement of Italy's fiscal consolidation and reversal of the public debt trajectory. A substantial and ongoing deterioration of medium-term funding conditions for Italy due to further substantial domestic economic and financial shocks from the euro area crisis would also be credit-negative. Moreover, Italy's sovereign rating could transition to substantially lower rating levels if the country's access to the public debt markets were to be constrained and the long-term availability of external sources of liquidity support were to remain uncertain.
Conversely, a successful implementation of economic reform and fiscal measures that effectively strengthen the Italian economy's growth pattern and the government's balance sheet would be credit-positive and could stabilise the outlook. Upward pressure on Italy's rating could develop if the government's public finances were to become less vulnerable to volatile funding conditions, further to a reversal of the upward trajectory in public debt and, ultimately, the achievement of substantially lower debt levels.
Moody's downgrades Malta's government bond rating to A3 from A2, negative outlook
Moody's Investors Service has today downgraded Malta's government bond rating to A3 from A2. The outlook remains negative.
The key drivers of today's rating action on Malta are:
1.) The uncertainty over the prospects for institutional reform in the euro area and the weak macroeconomic outlook across the region, which will continue to weigh on already fragile market confidence.
2.) Malta's relatively weak debt metrics compared with 'A' category peers and the country's reliance on the strength of the European economy, which will dampen its own growth prospects in the medium term and worsen its debt dynamics.
Moody's is maintaining a negative outlook on Malta's sovereign rating to reflect the potential for a further decline in economic and financing conditions as a result of a deterioration in the euro area debt crisis.
In a related rating action, Moody's has today also downgraded the foreign- and local-currency debt ratings of Malta Freeport Co. to A3 from A2 given its status as a government-guaranteed entity. The outlook remains negative in line with the sovereign rating.
RATIONALE FOR DOWNGRADE
As indicated in the introduction of this press release, a contributing factor underlying Moody's one-notch downgrade of Malta's government bond rating is the uncertainty over the euro area's prospects for institutional reform of its fiscal and economic framework and over the resources that will be made available to deal with the crisis. Moreover, Europe's weak macroeconomic prospects complicate the implementation of domestic austerity programmes and the structural reforms that are needed to promote competitiveness. Moody's believes that these factors will continue to weigh on market confidence, which is likely to remain fragile, with a high potential for further shocks to funding conditions. In addition to constraining the creditworthiness of all European sovereigns, the fragile financial environment increases Malta's susceptibility to financial and macroeconomic shocks given the concerns identified below.
The fragile external environment is exacerbating a number of Malta's own challenges which continue to weigh negatively on the country's debt rating and constitute the second driver of Moody's downgrade. Malta's debt metrics are among the weaker of the 'A'-rated sovereigns. Growth prospects over the medium term also appear poorer for Malta than for its peers, given the country's dependence on tourism from the euro area as its main source of economic growth. This will hinder the narrowing of the fiscal imbalance. Lower business confidence and tighter credit conditions are likely to result in weak private-sector investment, and real output growth is likely to be significantly lower than the government's forecast of over 2%. The deteriorating growth prospects and the concomitant impact on already weak debt dynamics will further reduce government financial strength and expose it to more constrained, higher-cost funding conditions.
WHAT COULD MOVE THE RATING UP/DOWN
Downward pressure on the rating could develop if Malta's economic growth prospects deteriorate significantly, thereby obstructing fiscal consolidation and leading to a significant further deterioration in the sovereign's key credit metrics. The rating could also be downgraded if an intensification of the euro area crisis were to result in materially higher cost or constrained funding conditions for the government. A further deterioration of macroeconomic conditions in Europe, leading to material fiscal and debt slippage in Malta, could also pressure the rating.
Conversely, the negative outlook on Malta's sovereign rating would be changed to stable in the event of a sustained improvement in investor sentiment across the euro area. Although unlikely in the foreseeable future, the government's ratings could move upward in the event of a significant improvement in the government's balance sheet, leading to greater convergence with 'A' category medians. Substantial structural reforms focused on enhancing competitiveness and boosting potential output growth rates would also be credit-positive.
Moody's downgrades Portugal's government bond rating to Ba3 from Ba2, negative outlook
Moody's Investors Service has today downgraded the government of Portugal's long-term debt ratings to Ba3 from Ba2. The outlook remains negative.
The key drivers of today's rating action on Portugal are:
1.) The uncertainty over the prospects for institutional reform in the euro area and the weak macroeconomic outlook across the region, which will continue to weigh on already fragile market confidence.
2.) The resulting potential for a deeper and longer economic contraction in Portugal than previously anticipated, and the ongoing deleveraging process in the country's economy and banking system.
3.) The higher-than-expected general government debt ratios, which are due to reach roughly 115% of GDP within the next two years, thereby significantly limiting the room for fiscal manoeuvre and commensurately reducing the likelihood of achieving a declining debt trajectory.
4.) Potential contagion emanating from the impending Greek default, which is likely to extend the period during which Portugal is unable to access long-term private markets once the current support programme expires.
Moody's is maintaining a negative outlook on Portugal's sovereign rating to reflect the potential for a further decline in economic and financing conditions as a result of a deterioration in the euro area debt crisis.
RATIONALE FOR DOWNGRADE
As indicated in the introduction of this press release, a contributing factor underlying Moody's one-notch downgrade of Portugal's government bond rating is the uncertainty over the euro area's prospects for institutional reform of its fiscal and economic framework and over the resources that will be made available to deal with the crisis. Moreover, Europe's weak macroeconomic prospects complicate the implementation of domestic austerity programmes and the structural reforms that are needed to promote competitiveness. Moody's believes that these factors will continue to weigh on market confidence, which is likely to remain fragile. This will in turn mean a high potential for further shocks to funding conditions, which will affect weaker sovereigns like Portugal first, increasing its susceptibility to other financial and macroeconomic shocks given the concerns identified below.
This backdrop is exacerbating Portugal's domestic challenges and informs the second driver of Moody's rating action, which is the weakening outlook for the country's economic growth prospects and the implications for the government's efforts to place its debt on a sustainable footing. Moody's expects the Portuguese economy to contract by more than 3% in 2012 given the multitude of downside risks from the region, including the impact of the ongoing deleveraging in the financial and private sector as well as the immediate impact of the government's austerity measures. The unemployment rate is likely to remain high and nominal wages will remain under pressure due to cutbacks in public-sector bonuses and staff levels, thus depressing domestic demand. Moreover, Moody's expectation of a slowdown among Portugal's main trading partners in 2012 will undermine the contribution from net exports, the only driver of GDP growth since the 2009 recession. Lastly, the macroeconomic impact of the targeted fiscal tightening in 2012 is programmed to be as intense as that of 2011, further subduing domestic growth prospects.
The third driver for the downgrade of Portugal's sovereign rating is the unfavourable revision of the forecast for government debt metrics, which are now projected to rise to around 115% of GDP or higher before stabilising. This greater-than-anticipated level is a consequence of the government's assumption of debt from state-owned enterprises and regional governments in 2008, 2009 and 2010, as well as the expectation that the government will need to draw the EUR12 billion bank recapitalisation package that is part of the IMF/EU program. At these levels, the government has very little room to manoeuvre in the event of further economic, financial or political shocks originating from either domestic or external sources. Moreover, in a low-growth environment, higher initial debt levels will further complicate the government's deleveraging efforts, especially since debt affordability (i.e. the cost of servicing the debt as a share of government revenues) is likely to remain more onerous than previously estimated.
The fourth driver of today's rating action is Moody's view that the increasing likelihood of a disorderly default by Greece (if it fails to gain the required level of support of investors for the proposed restructuring terms, or further financial assistance from official-sector supporters) will very likely make Portugal unable to access long-term market funding in September 2013 as planned, and increase pressure on the government to seek a debt restructuring. Moody's believes that there is a high risk of contagion from Greece among weaker euro area sovereigns in particular. While unfavourable market perceptions will not affect Portugal's access to long-term official-sector funding under its International Monetary Fund/European Union support programme until at least 2014, and probably beyond, Moody's notes that access to official-sector funding is not a guarantee of support from private-sector creditors. Moreover, the longer official-sector support is needed, the greater the pressure for a restructuring of Portugal's private-sector debt becomes.
While risks remain weighted to the downside, there are several reasons why Moody's downgrade of Portugal's government debt rating is limited to one notch. The first is the government's success in exceeding fiscal targets, as set out in its IMF/EU-supported economic adjustment programme. This was possible despite the initial significant divergence in the government deficit from these targets in the first half of 2011, additional setbacks such as assuming the debt and debt-servicing obligations of some state-owned enterprises under recent EU accounting rules, as well as EUR1.1 billion in previously unreported debt stemming from the autonomous region of Madeira. These setbacks were partly overcome with the help of the one-off transfer of pension assets worth 3.5% of GDP from the big four commercial banks to the central government, which facilitated a total reduction in Portugal's nominal general government deficit by nearly 6% of GDP in 2011.
The second reason for the limited rating adjustment is Moody's expectation that the Portuguese government will have achieved a structural budget correction in 2011 equivalent to around 4% of GDP, which the IMF estimates to be the largest such adjustment in Europe in 2011. A third reason is that, in 2011, the Portuguese government also began to design and implement a set of further structural reforms intended to bolster the economy's potential growth rate. The Portuguese government, unlike that of Greece, has managed to secure the cooperation of a large segment of the labour force for these reforms.
WHAT COULD MOVE THE RATING UP/DOWN
The rating could be further downgraded if the government's deficits are not kept sufficiently low to place the debt ratios on a clear downward path within the next three years, or if the government fails to meet its fiscal targets or fails to implement its planned structural reforms. An intensification of the euro area crisis and further deterioration of macroeconomic and financial market conditions in Europe, leading to material fiscal and debt slippage in Portugal, could also pressure the country's rating.
Although positive rating pressure is not likely over the near to medium term, Moody's considers that the outlook on Portugal's debt rating could stabilise if the government were to pursue macroeconomic policies that place its debt on a sustainable downward trajectory and buoys the economy's growth potential. The credit would also benefit from continued compliance with the IMF/EU programme and ongoing enactment of the promised structural reforms, which would improve market confidence and increase the likelihood that the Portuguese government will regain access to the private long-term debt market.
Moody's downgrades Slovakia's government bond rating to A2 from A1, negative outlook
Moody's Investors Service has today downgraded Slovakia's government bond ratings to A2 from A1. The outlook has been changed to negative.
The key drivers of today's rating action on Slovakia are:
1.) The uncertainty over the prospects for institutional reform in the euro area and the weak macroeconomic outlook across the region, which will continue to weigh on already fragile market confidence.
2.) Slovakia's increased susceptibility to financial and political event risk, presenting considerable challenges to achieving the government's fiscal consolidation targets and reversing the adverse trend in debt dynamics.
3.) The increased downside risks to economic growth due to weakening external demand.
Moody's has changed the outlook on Slovakia's sovereign rating to negative to reflect the potential for a further decline in economic and financing conditions as a result of a deterioration in the euro area debt crisis.
RATIONALE FOR DOWNGRADE
As indicated in the introduction of this press release, a contributing factor underlying Moody's one-notch downgrade of Slovakia's government bond rating is the uncertainty over the euro area's prospects for institutional reform of its fiscal and economic framework and over the resources that will be made available to deal with the crisis. Moreover, Europe's weak macroeconomic prospects complicate the implementation of domestic austerity programmes and the structural reforms that are needed to promote competitiveness. Moody's believes that these factors will continue to weigh on market confidence, which is likely to remain fragile, with a high potential for further shocks to funding conditions. In addition to constraining the creditworthiness of all European sovereigns, the fragile financial environment increases Slovakia's susceptibility to financial and macroeconomic shocks given the concerns identified below.
The fragile external environment is directly increasing Slovakia's susceptibility to financial event risk, which is the second driver informing the one-notch downgrade of the country's government bond rating. Specifically, the volatile market conditions are increasing Slovakia's financing costs and its growing funding risks. At the same time, political event risk has also been heightened by the recent collapse of the government led by Prime Minister Iveta Radicova following a confidence vote in October 2011. Increased susceptibility to financial and political event risk present considerable challenges to achieving the government's fiscal consolidation targets and reversing the recent adverse trend in debt dynamics. Slovakia's general government debt-to-GDP ratio has climbed from 28% in 2008 to over 44% in 2011, and will not stabilise in 2012-13 as had been initially expected.
The third factor underlying the downgrade is Slovakia's exposure to the deteriorating regional macroeconomic environment given the dependence of the economy on external demand, a key channel for contagion from the euro area crisis. Subdued activity in the euro area will continue to negatively affect the export-driven Slovak economy, constraining its ability to implement its fiscal consolidation targets, especially in light of the downfall of the ruling coalition, which had been committed to achieving these targets. While Moody's forecasts a 1.1% growth in real GDP for 2012, risks remain firmly on the downside as continued uncertainty hinders business and consumer confidence in Slovakia and the broader euro area. Weaker revenue collection will hamper the government's efforts to reduce its deficit going forward, resulting in a further deterioration of the government's balance sheet. The potential for further fiscal slippage remains high, while the willingness of the new Slovak government to take the steps needed to achieve the revised fiscal targets presents considerable implementation risks.
WHAT COULD MOVE THE RATING UP/DOWN
Downward pressure on the rating could develop if Slovakia's economic growth prospects deteriorate significantly, thereby obstructing fiscal consolidation and leading to a significant further deterioration in the government's balance sheet. A sharp intensification of the euro area crisis and further deterioration of macroeconomic conditions in Europe, leading to material fiscal and debt slippage in Slovakia, could also pressure the country's rating. Moody's would view such fiscal slippage negatively as it would lead to a deterioration of policy credibility and debt dynamics. This would in turn adversely affect Slovakia's funding prospects, increase rollover risk and result in a higher cost of funding for the government.
Moody's would consider changing the negative outlook to stable in the event of a sustained improvement in investor sentiment across the euro area, thereby materially reducing the risk of contagion from the euro area periphery. Similarly, a stabilisation in Slovakia's debt metrics would reduce negative pressure on the rating. Although unlikely in the foreseeable future, Moody's would upgrade the rating in the event of a resumption of structural improvements, a significant strengthening of the government's balance sheet and debt ratios relative to the 'A' category, and resumed convergence of Slovakia's credit metrics with EU levels.
Moody's downgrades Slovenia's government bond rating to A2 from A1, negative outlook
Moody's Investors Service has today downgraded Slovenia's local- and foreign-currency government bond ratings to A2 from A1. The outlook remains negative.
The key drivers of today's rating action on Slovenia are:
1.) The uncertainty over the prospects for institutional reform in the euro area and the weak macroeconomic outlook across the region, which will continue to weigh on already fragile market confidence.
2.) The risk to Slovenia's public finances from potential further shocks, especially the possible need to provide further support to the nation's banking system.
3.) The difficulties that Slovenia's small and open economy faces in view of weak growth among key European trading partners, and the resulting significant challenge to the government's ability to achieve its medium-term fiscal consolidation plans.
Moody's is maintaining a negative outlook on Slovenia's sovereign rating to reflect the potential for a further decline in economic and financing conditions as a result of a deterioration in the euro area debt crisis.
RATIONALE FOR DOWNGRADE
As indicated in the introduction of this press release, a contributing factor underlying Moody's one-notch downgrade of Slovenia's government bond rating is the uncertainty over the euro area's prospects for institutional reform of its fiscal and economic framework and over the resources that will be made available to deal with the crisis. Moreover, Europe's weak macroeconomic prospects complicate the implementation of domestic austerity programmes and the structural reforms that are needed to promote competitiveness. Moody's believes that these factors will continue to weigh on market confidence, which is likely to remain fragile, with a high potential for further shocks to funding conditions. In addition to constraining the creditworthiness of all European sovereigns, the fragile financial environment increases Slovenia's susceptibility to financial and macroeconomic shocks given the concerns identified below.
The deteriorating macroeconomic environment is exacerbating a number of existing and potential pressures on the Slovenian government's balance sheet, which are weighing on its creditworthiness and constitute the second driver of Moody's one-notch downgrade of Slovenia's bond rating. While somewhat shielded by manageable (but rising) debt and debt servicing levels, Slovenia's public finances are at risk from potential further shocks, stemming from a possible further deterioration in the economic growth outlook in the euro area and globally and the likely need to provide further support to the country's banks.
In particular, the country's largest banks face asset quality, capitalisation and funding challenges. In comparison with other systems in Central and Eastern Europe, Slovenia has a large banking sector, with total assets equivalent to 136% of GDP. Asset quality pressure and the euro area debt crisis are weighing on the sector's solvency and threaten its ability to continue to access private funding markets. Non-performing loan ratios are continuing to rise, reflecting concentrations of exposure towards the highly leveraged corporate sector. Slovenian banks' asset quality, profitability and funding position remain under considerable stress, increasing the risk of additional governmental support being needed, which would further pressure the sovereign's debt metrics.
The third driver informing Moody's rating decision on Slovenia is the threat to growth in the country's small and open economy given the poor growth prospects among Slovenia's principal export markets in Europe. Moreover, the ongoing significant adjustment in Slovenia's highly leveraged corporate sector, particularly the construction sector, and the deleveraging across all sectors of the economy, are expected to continue to represent a drag on economic activity for the next year or so. The weak economic outlook poses a significant challenge to the Slovenian government's ability to achieve its medium-term fiscal consolidation plans and may necessitate additional fiscal measures that could further pressure the sovereign's debt metrics.
These credit pressures have intensified and become more apparent in the period since Moody's last rating action in December 2011, and are contributing to the need to reposition Slovenia's rating in the middle of the 'A' range.
WHAT COULD MOVE THE RATING UP/DOWN
A further downward adjustment in Slovenia's sovereign rating could result from (i) a substantial intensification of the risks and uncertainties for the Slovenian government's balance sheet, stemming from the potential need for further support to banks; or (ii) a further marked deterioration in economic growth prospects due to external shocks stemming from the euro area crisis, which would in turn lead to the potential failure of the government to stabilise and reverse the general government debt trajectory.
Moody's would stabilise the outlook on Slovenia's rating in the event of government progress in implementing economic and fiscal policies that pave the way for a substantial and sustainable trend of increasing primary surpluses, and lead to a significant reversal in the public debt trajectory.
Moody's downgrades Spain's government bond rating to A3 from A1, negative outlook
Moody's Investors Service has today downgraded the government bond rating of the Kingdom of Spain to A3 from A1. The outlook on the rating is negative.
Concurrently, Moody's has also downgraded the rating of Spain's Fondo de Reestructuración Ordenada Bancaria (FROB) to A3 with a negative outlook from A1, in line with the sovereign rating action, given that FROB's debt is fully and unconditionally guaranteed by the Kingdom of Spain. Both Spain's and the FROB's short-term ratings have been downgraded to (P)Prime-2 from (P)Prime 1.
The key drivers of today's rating action on Spain are:
1.) The uncertainty over the prospects for institutional reform in the euro area and the weak macroeconomic outlook across the region, which will continue to weigh on already fragile market confidence.
2.) The country's challenging fiscal outlook is being exacerbated by the larger-than-expected fiscal slippage in 2011, mainly on account of budget overshoots by Spain's regional governments. Moody's is sceptical that the new government will be able to achieve the targeted reduction in the general government budget deficit, leading to a further increase in the rapidly rising public debt ratio.
3.) The pressures on the Spanish economy, which is close to entering a renewed recession, will be further increased by the need for even stronger action to achieve a deficit reduction. A renewed recession will also negatively affect the profitability of Spanish banks at a time when they are required to clean up their balance sheets.
Moody's is maintaining a negative outlook on Spain's sovereign ratings to reflect the potential for a further decline in economic and financing conditions as a result of a deterioration in the euro area debt crisis.
RATIONALE FOR DOWNGRADE
As indicated in the introduction of this press release, a contributing factor underlying Moody's two-notch downgrade of Spain's government bond rating is the uncertainty over the euro area's prospects for institutional reform of its fiscal and economic framework and over the resources that will be made available to deal with the crisis. Moreover, Europe's weak macroeconomic prospects complicate the implementation of domestic austerity programmes and the structural reforms that are needed to promote competitiveness. Moody's believes that these factors will continue to weigh on market confidence, which is likely to remain fragile. This will in turn mean a high potential for further shocks to funding conditions, which will affect weaker sovereigns like Spain first, increasing its susceptibility to other financial and macroeconomic shocks given the concerns identified below.
The second driver underpinning the downgrade of Spain's sovereign rating is Moody's expectation that the country's key credit metrics will continue to deteriorate. The larger-than-expected fiscal deviation reported for 2011 (with a general government deficit of around 8% of GDP vs. a target of 6%) make the country's fiscal outlook for 2012 even more challenging than Moody's anticipated at the time of its last rating action on Spain. Moody's acknowledges that the new government has taken timely action to compensate for a large part of last year's fiscal slippage, and has also taken steps to place the regional governments' finances under closer supervision. However, the effectiveness of these steps remains to be seen. Overall, the adjustment required to bring the public finances back onto the targeted path (a budget deficit target of 4.4% of GDP in 2012) is unprecedented. According to Moody's estimates, a total fiscal adjustment of approximately EUR40 billion (3.7% of GDP) will be needed, compared to a reduction in the deficit of around EUR28 billion in aggregate in 2010 and 2011.
Moody's is therefore sceptical that the target can be achieved and expects the general government budget deficit to remain between 5.5% and 6% of GDP. This in turn implies that the public debt ratio will continue to rise. Under Moody's base-case assumption, the debt ratio will be around 75% of GDP at the end of the year, more than double the trough reached in 2007, and will likely approach the 80% of GDP mark in the coming two years. One of Spain's key relative credit strengths -- its lower debt-to-GDP ratio compared to some of its closest peers in Europe -- is therefore eroding.
The third driver of today's rating action is the weakening Spanish economy, which is likely to come under even greater pressure because of the need for stronger action to achieve a deficit reduction. Spain recorded a contraction in real GDP of 0.3% quarter-on-quarter in Q4 of 2011 and Moody's expects Spain's GDP to contract by a further 1%-1.5% in 2012, compared to a forecast of low but positive growth of around 1% just a few months ago.
A renewed recession will further affect the profitability of Spanish banks at a time when they are expected to remove impaired real-estate-related assets from their balance sheets. Moody's views positively the new government's attempt to force the banking sector to increase provisioning against problematic assets related to banks' exposure to the real estate sector, thereby improving the transparency of banks' balance sheets and contributing to restoring market confidence. However, Moody's is doubtful that the government's plan to encourage stronger banks to merge with weaker ones will be achievable without further support from the public sector. The rating agency therefore continues to believe that the contingent risks arising from the banking sector are higher and more likely to crystallise in the case of Spain than among many of its peers. Moody's recognises that the labour market reforms, announced by the government on 10 February, are important steps to increase the flexibility in the labour market and should help foster faster employment growth once the economic recovery begins.
The decision to downgrade by two notches is explained by Moody's view that Spain's credit fundamentals and outlook are difficult to reconcile with a rating above the lower end of the "single-A" rating category. Indeed, peers at the top of the single-A category (like the Czech Republic and South Korea) as well as those in the middle of the category (like Poland), do not face Spain's fiscal and growth challenges, nor do they have banking systems with similar issues.
WHAT COULD MOVE THE RATINGS UP/DOWN
Moody's expects Spain's A3 rating to exhibit some degree of tolerance to potential downside scenarios that may emerge in coming quarters, including (i) a further modest deterioration in the macroeconomic outlook relative to the rating agency's base case expectation; (ii) a moderate deviation from the government's current fiscal targets and limited additional cost to the government from supporting the restructuring of the banking sector; as well as (iii) occasional political set-backs in the progress towards agreeing and implementing the necessary reforms to restore confidence.
However, Moody's rating would not be immune to a further substantial deterioration in macroeconomic or financial market conditions, leading to sharp fiscal and debt slippage in Spain, or to a substantial erosion in Spanish policymakers' commitment to reform implementation.
The rating outlook could be stabilised at the current level if the wider euro area situation were to be resolved conclusively. The rating could be upgraded if and when the economy is placed on a clear and improving trend and the public debt ratio has stabilised at sustainable levels.
Moody's changes the outlook on the United Kingdom's Aaa rating to negative
Moody's Investors Service has today changed the outlook on the United Kingdom's Aaa government bond rating to negative from stable.
The key drivers of today's action on the United Kingdom are:
1.) The increased uncertainty regarding the pace of fiscal consolidation in the UK due to materially weaker growth prospects over the next few years, with risks skewed to the downside. Any further abrupt economic or fiscal deterioration would put into question the government's ability to place the debt burden on a downward trajectory by fiscal year 2015-16.
2.) Although the UK is outside the euro area, the high risk of further shocks (economic, financial, or political) within the currency union are exerting negative pressure on the UK's Aaa rating given the country's trade and financial links with the euro area. Overall, Moody's believes that the considerable uncertainty over the prospects for institutional reform in the euro area and the region's weak macroeconomic outlook will continue to weigh on already fragile market confidence across Europe.
Concurrently, Moody's has today also changed to negative the outlook on the Aaa debt rating of the Bank of England in line with the change of outlook on the UK's sovereign rating.
RATIONALE FOR NEGATIVE OUTLOOK
The primary driver underlying Moody's decision to change the outlook on the UK's Aaa rating to negative is the weaker macroeconomic environment, which will challenge the government's efforts to place its debt burden on a downward trajectory over the coming years. These challenges, reflecting the combined effect of a commodity price driven hit to real incomes, the confidence shock from the euro area and a reassessment of the lasting effects of the financial crisis on potential output, were already evident in the government's Autumn Statement. The statement announced that a further two years of austerity measures would be needed in order for the government to meet its fiscal mandate of achieving a cyclically adjusted current budget balance by the end of a rolling five-year time horizon, and to reach its target of placing net public sector debt on a declining path by fiscal year 2015-16.
Moody's central expectation is that these objectives will be met, with a general government gross debt-to-GDP ratio peaking at just under 95% in 2014 or 2015, before gradually declining thereafter. However, Moody's expects the UK's debt to peak later, and at a higher level, than in most other Aaa-rated countries. Moreover, risks to the rating agency's forecasts are skewed to the downside. In part, these risks are the by-product of a necessary fiscal consolidation programme and the ongoing parallel deleveraging process in both the household and financial sectors. Moody's also believes that the further cutbacks announced last autumn indicate that the government has a reduced capacity to absorb further abrupt economic or fiscal deterioration without incurring a further slippage in its consolidation timetable.
A combination of a rising medium-term debt trajectory and lower-than-expected trend economic growth would put into question the government's ability to retain its Aaa rating. The UK's outstanding debt places it amongst the most heavily indebted of its Aaa-rated peers, alongside the United States and France whose Aaa ratings also carry a negative outlook.
The second and interrelated driver of Moody's decision to change the UK's rating outlook to negative is the fact that the weaker environment is also, in part, a by-product of the ongoing crisis in the euro area. Although the UK is outside the euro area, the crisis is affecting the UK through three channels: trade, the financial sector and consumer and investor confidence.
Moody's believes that there is considerable uncertainty over the euro area's prospects for institutional reform of its fiscal and economic framework and over the resources that will be made available to deal with the crisis. Moreover, Europe's weak macroeconomic outlook complicates the implementation of domestic austerity programmes and the structural reforms that are needed to promote competitiveness. Moody's believes that these factors will continue to weigh on market confidence, which is likely to remain fragile, with a high potential for further shocks to funding conditions.
In addition to constraining the creditworthiness of all European sovereigns, the fragile financial environment increases the UK's susceptibility to financial and macroeconomic shocks. Any such shock would pose further risks to the performance of the UK economy and to the strength of its financial sector, with inevitable consequences for the government's ability to achieve fiscal consolidation on schedule. Moreover, while the UK currently enjoys 'safe haven' status, there is also a growing risk that the weaker macroeconomic outlook could damage market confidence in the government's fiscal consolidation programme and cause funding costs to rise.
RATIONALE FOR CONTINUED Aaa RATING
Although Moody's has some concerns about the UK's macroeconomic outlook for the next few years, the UK's Aaa sovereign rating continues to be well supported by a large, diversified and highly competitive economy, a particularly flexible labour market, and a banking sector that compares favourably to peers in the euro area. The economy generally benefits from the significant structural reforms undertaken in the past. As a result of these strong structural features, Moody's expects the UK to eventually return to its trend growth rate of around 2.5%, although the return to trend growth is expected to be slower than originally expected, reflecting the nature and depth of the financial crisis.
The current fiscal consolidation programme remains intact and the government has demonstrated its willingness and ability to take action to address shortfalls. The UK has been proactive in pushing banks to hold more capital and in taking steps to reduce the probability and impact of the sovereign having to use its own balance sheet to support British banks. Further, the outstanding debt stock has important structural features that give the UK government a very high shock-absorption capacity.
The government is implementing an ambitious fiscal consolidation programme and so far has been meeting , and even exceeding, its deficit reduction forecasts. In the Autumn Statement, the Office for Budget Responsibility (OBR) announced weaker economic growth forecasts, to which the government responded by announcing further spending cuts, both over the medium and long term. Although Moody's sees rising challenges in achieving debt reduction within the timeframe that has been laid out by the government -- not least the possible impact of any future cutbacks on short-term growth -- the rating agency believes that the UK government's response to negative developments late last year indicates its commitment to restoring a sustainable debt position. This suggests that the UK's track record of reversing increases in debt is likely to continue going forward.
The UK's Aaa rating is also supported by the robust structure of government debt. The UK has the lowest refinancing risk of all the large Aaa economies, based on the average maturity of the UK's debt stock (nearly 14 years), its large domestic investor base, and the willingness and ability of its central bank to undertake accommodative monetary policy.
WHAT COULD MOVE THE RATING DOWN
The UK's Aaa rating could potentially be downgraded if Moody's were to conclude that debt metrics are unlikely to stabilise within the next 3-4 years, with the deficit, the overall debt burden and/or debt-financing costs continuing on a rising trend. This could happen in one of three scenarios, all of which would imply lower economic and/or government financial strength: (1) a combination of significantly slower economic growth over a multi-year time horizon -- perhaps due to persistent private-sector deleveraging and very weak growth in Europe -- and reduced political commitment to fiscal consolidation, including discretionary fiscal loosening or a failure to respond to a deteriorating fiscal outlook; (2) a sharp rise in debt-refinancing costs, possibly associated with an inflation shock or a deterioration in market confidence over a sustained period; or (3) renewed problems in the banking sector that force a resumption of official support programmes and spill over into the real economy, indirectly causing lower growth and larger budget deficits.
Conversely, the rating outlook could return to stable if the combination of less adverse macroeconomic conditions, progress towards containing the euro area crisis and deficit reduction measures were to ease medium-term uncertainties with regards to the country's debt trajectory.
REGULATORY DISCLOSURES
Although the following credit ratings have been issued in a non-EU country which has not been recognized as endorsable at this date, these credit ratings are deemed "EU qualified by extension" and may still be used by financial institutions for regulatory purposes until 30 April 2012. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com [43].
Government of Finland
Government of Malta
Government of Portugal
Government of Slovakia
Fondo de Reestructuracion Ordenada Bancario
Malta Freeport Corporation Limited
For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com [43].
The ratings Government of France, Government of Germany, Government of Italy, Government of Luxembourg, Government of Netherlands and Government of United Kingdom were initiated by Moody's and were not requested by these rated entities.
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Information sources used to prepare the ratings for Governments of Slovenia, Slovakia, Portugal, Malta and Malta Freeport Corporation Limited are the following: parties involved in the ratings, parties not involved in the ratings, and public information.
Information sources used to prepare the ratings for Governments of France, Italy, Societe de Financement de L'Economie Francaise and Societe de Prise de Participation de l'Etat are the following: parties involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.
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