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S&P lowers EU outlook

August 4, 2015

US ratings agency Standard & Poor's has changed its outlook for the 28-member European Union to "negative." It said the decision came amid growing concerns over Greece's debt load and a possible Brexit.

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Standard & Poor's (S&P) confirmed Tuesday it had changed its outlook for the European Union from "stable" to negative."

The decision means that the US ratings agency looks more likely now to lower its current "AA+" grade of the EU in the next two years.

The agency expressed particular concern over the ongoing Greek debt crisis and attempts by fellow eurozone nations to provide fresh financing through a variety of channels.

Greece not the only headache

"The EU's repeated use of its balance sheet to provide higher-risk financing to EU member states (most recently including Greece), without the member states' paying in capital" is seen as a major driver behind the revised outlook, S&P said.

S&P also said it expected the EU to provide first-loss guarantees for lending under the so-called Juncker plan, with the head of the European Commission hoping to roll out 315 billion euros ($344 billion) in investment over the next three years.

Non-performing loans – A time bomb in Greek banks

S&P reiterated its concern over a possible Brexit, saying a UK exit from the EU was bound to have dire consequences for the whole bloc due to Britain's outsized role in the EU.

The UK, France and Germany together are the largest contributors to the EU budget, about 70 percent between them.

hg/cjc (Reuters, AFP)