22nd Mar 2018

UK downgrade rounds off EU's Black Friday

Rating agency Moody's stripped the UK of its coveted AAA credit rating on Friday (22 February), rounding off a day of economic gloom in the EU.

In a statement released shortly before the closure of the markets, Moody's said that the downgrade was the result of "continuing weakness in the UK's medium-term growth outlook, with a period of sluggish growth which Moody's now expects will extend into the second half of the decade".

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

  • Britain's credit rating has been cut for the first time since 1978 (Photo: MyTudut)

It is the first time Moody's has downgraded the UK's creditworthiness since its ratings system was set up in 1978. Meanwhile, the two other big rating agencies - Standard & Poor's and Fitch - are yet to cast their verdict ahead of the country's next annual budget on March 20.

The downgrade leaves just six EU countries - Denmark, Finland, Germany, Luxembourg, the Netherlands and Sweden - with AAA ratings.

The UK's credit rating has been under pressure for several years as the country struggles to recover from the damage caused by the 2007-9 financial crisis.

It managed 0 percent growth in 2012 and the European Commission has forecast a 0.9 percent increase in output over the course of 2013. Among the 27 EU countries, only Spain, Ireland and Greece ran a budget deficit higher than the UK's projected 6.3 percent shortfall in 2012. Meanwhile, the UK's debt pile is expected to clear 95 percent in 2013.

The news is a big blow to the Conservative-led Coalition government and, in particular, Chancellor George Osborne. Osborne had staked his political reputation on protecting the UK's triple AAA status.

Responding to the news, Osborne said that the downgrade was a "stark reminder of the debt problems facing our country". He added that the government would continue "delivering the plan that has cut the deficit by a quarter, and given us record low interest rates and record numbers of jobs."

The downgrade came at the end of a day of dismal economic news, following the morning publication of the European Commission's Winter Forecast. The EU executive expects the eurozone to remain in recession in 2013 with economic output falling by a further 0.3 percent over the course of the year.

There was, however, a crumb of comfort as Moody's also revised the UK's economic outlook from 'negative' to 'stable', praising what it described as the country's "significant credit strengths."

Moreover, the downgrade is more likely to be a symbolic blow and is not expected to have a significant effect on UK borrowing rates.

UK spreads on ten-year government bonds, which had fallen to historic lows over the past two years as investors have searched for safe investment havens outside the eurozone, currently stand at 2 percent, around 0.5 percent higher than those of German Bunds.

Eurozone recession to continue in 2013

The eurozone economy will shrink by a further 0.3 per cent in 2013, the European Commission has said. The bloc will have to wait until 2014 before seeing economic growth.

Eurozone still mired in recession

The eurozone economy shrank in the final three months of 2012, dealing a blow to those hoping that the bloc's recession had run its course.

Ratings agency downgrades EU on summit day

A top US agency has downgraded the bloc's rating over concerns that some member states - notably Britain - may not pay their share into the common budget.

VW dismisses complaints on Dieselgate fix

'I think customers who want to get information (...) are able to receive information if they want," VW management board member Hiltrud Werner told EUobserver. Consumer groups disagree.

News in Brief

  1. EU will be exempted from tariffs, says US minister
  2. Malmstroem: EU 'hopes' for US tariffs exemption
  3. Parliament must publish 'trilogue' documents, court says
  4. Italy's centre-right set to share top posts with 5-star movement
  5. Brussels condemns tear gas in Kosovo parliament
  6. Finland pays billionaire €400,000 in EU farm subsidies
  7. 44 leaders sign up for Africa free trade area deal
  8. British 'blue' passports to be made in EU

Stakeholders' Highlights

  1. EUobserverStart a Career in EU Media. Apply Now to Become Our Next Sales Associate
  2. EUobserverHiring - Finance Officer With Accounting Degree or Experience - Apply Now!
  3. ECR GroupAn Opportunity to Help Shape a Better Future for Europe
  4. Counter BalanceControversial Turkish Azerbaijani Gas Pipeline Gets Major EU Loan
  5. World VisionSyria’s Children ‘At Risk of Never Fully Recovering', New Study Finds
  6. Macedonian Human Rights MovementMeets with US Congress Member to Denounce Anti-Macedonian Name Negotiations
  7. Martens CentreEuropean Defence Union: Time to Aim High?
  8. UNESDAWatch UNESDA’s President Toast Its 60th Anniversary Year
  9. AJC Transatlantic InstituteAJC Condemns MEP Ana Gomes’s Anti-Semitic Remark, Calls for Disciplinary Action
  10. EPSUEU Commissioners Deny 9.8 Million Workers Legal Minimum Standards on Information Rights
  11. ACCAAppropriate Risk Management is Crucial for Effective Strategic Leadership
  12. EPSUWill the Circular Economy be an Economy With no Workers?

Latest News

  1. EU summit takes hard look at Russia
  2. Germany casts doubt on Austrian intelligence sharing
  3. EU leaders set for 'stormy debate' on digital tax at summit
  4. EU praises Turkey on migrant deal despite Greek misery
  5. Judicial reforms 'restore balance', Poland tells EU
  6. Whistleblower fears for life as US arrests Malta bank chair
  7. Behind the scenes at Monday's EU talks on Russia
  8. US yet to push on Nord Stream 2 sanctions