Last week, ratings agency Moody’s warned that France and Germany may receive a downgrade from their AAA-credit rating, sending stock markets tumbling.
Many were hoping that an acceptable EU treaty would stem the eurozone debt crisis enough to ward off a ratings cut.
However, despite last week’s summit, Moody’s has accused the European Union of a “continued absence of decisive policy measures,” and warned of credit rating drops again.
The ratings agency has said again that it will review the credit ratings of all EU countries in the first three months of 2012.
Standard and Poor’s, a rival ratings agency, has also made it clear that it will consider downgrading the credit of 15 out of 17 eurozone countries.
This news spread contagion of doubt throughout global markets, with the German Dax index down 3.36%.
The main index in the United States, the Down Jones, closed down 1.3%. Though it closed at just 162.87 points down, at one point during morning trading the index fell a shocking 243 points.
Additionally, both France’s Cac-40 and the the FTSE 100 in the UK have fallen sharply, down 2.61% and 1.83% respectively.
French President Nicolas Sarkozy has said that, should it lose its top AAA-credit rating, it would mean “one more difficulty, but not insurmountable.”
However, the havoc being wreaked on markets just at the threat of lowered credit ratings speaks to the crucial importance of preserving credit ratings.
Moody’s has said that the potential ratings drops will be a direct result of the EU leadership that has so far been unable to contain the eurozone crisis. The agency said that Friday’s crucial summit in Belgium offered “few new measures” to practically deal with the debt crisis.
Moody’s has said that “the absence of measures to stabilise the credit markets over the short term” mean that the eurozone, and even the wider EU, are “prone to futher shocks.”
It also said that the cohesion of the eurozone is under “continued threat,” which eurozone leaders such as Germany’s Merkel and France’s Sarkozy deny vehemently.
In an effor to keep the eurozone together, the “troika” of lenders from the EU, European Central Bank (ECB), and International Monetary Fund (IMF) met in Athens on Monday.
The group will discuss Greece’s debt problems and the details of a new bailout plan to solve them.