Moody’s Issues Warning on Eurozone Debt Crisis
Moody’s Investors Service issued a warning Monday that the escalating eurozone debt crisis is threatening all of the region’s sovereign debt ratings, and a failure by the region’s leaders to act quickly may lead to a significant number of downgrades as soon as the first quarter of 2012.
The widespread crisis has already prompted the removal of five European leaders, the most recent being Italian Prime Minister Silvio Berlusconi. A meeting between finance ministers from the region is scheduled to begin Tuesday in Brussels to discuss solutions to the growing problem.
The crisis escalated last week, as bond yield prices spiked in Italy, Spain and Portugal, and Hungary’s sovereign debt rating was downgraded to junk status. Moody’s said that multiple defaults by eurozone members is now a very real possibility, and even if defaults are avoided some countries may struggle to obtain financing and require bailouts from the broader European economy. The agency also warned that multiple exit scenarios, such as a fragmentation of the euro, would have negative impacts on all eurozone countries.