Oct. 22 (Bloomberg) — European countriesâ€™ rising debt wonâ€™t trigger across-the-board credit-rating downgrades because countries are measured relative to each other, Moodyâ€™s Investors Service said.
The worst recession in six decades and the stimulus measures used to moderate its effects are going to drive debt levels up in the euro zone and in the European Union over the next two years, the European Commission predicts.
â€œWe are doing relative ranking of sovereign risk within peer groups,â€ Alexander Kockerbeck, a senior European analyst for Moodyâ€™s, said in an interview. â€œPart of the quality of an AAA country is to be able to absorb a shock of this kind.â€
Moodyâ€™s ranks Germany and France among the countries with the highest credit ratings. European governments spent billions of euros to fight the regionâ€™s worst recession since World War II. As a result, the commission forecasts that euro-area debt will rise to 77.7 percent this year from 69.3 percent, and that it would advance to 83.8 percent in 2010.
Debt sustainability will continue to be monitored country- by-country, Kockerbeck said. Moodyâ€™s downgraded Irelandâ€™s top credit rating in July, cutting it one step to Aa1.
While a temporary debt expansion should be expected, countries need to get their public finances under control soon because of the regionâ€™s ageing population, Kockerbeck said.