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Moody´s Warns Austria of Another Downgrade

Published: June 9, 2012; 13:55 · (Vindobona)

The U.S. rating agency may downgrade European AAA-countries like Austria, Germany or France soon.

Moody´s Warns Austria of Another Downgrade / Picture: © Vindobona.org

In case of a Greek exit or capital injections for Spanish Banks, Moody´s will downgrade a number of Eurozone member states. The EU expects that Spanish banks may have a capital shortfall of up to € 100bn. But for the time being, the problems of the Spanish banking sector would be domestic problems.

At the moment, Germany, France, Finland, the Netherlands and Austria have an „AAA“ rating. For Moody´s the existence of the common currency is endangered. This would also affect countries with the best solvency like Austria, Moody´s explained. The biggest problem of the Eurozone would be still Greece.

This week, Moody´s continued its downgrades of European banks. The Austrian RBI and UniCredit´s subsidiary Bank Austria lost one notch. Erste Group was dowgraded by two notches. The rating agency criticized that Austrian banks would have low equity quotas and have risky assets in Eastern Europe.

The downgrade of the creditworthiness would reflect the increased vulnerability, the unfavorable economic environment in Eastern Europe and the rising risks in these markets. The current euro-crisis would sharpen the situation, Moody´s argued. Non-performing loans of Austrian banks in the CESEE region would remain at a high levelHowever, Moody´s underlined that the exposure of Austrian banks in Southern Europe is relatively small. In total, the exposure of Austrian banks in Spain and Portugal amounts to € 4.3bn. Investments in Spain total € 3.5bn, those in Portugal account for € 800m.