AMSTERDAM/MADRID: Standard & Poor’s agency cut the Netherlands’ credit rating yesterday, reducing the euro zone club of full triple-A nations to just three, while rewarding Spain for efforts to reform its public finances.
S&P lowered the Netherlands, which is suffering from an anaemic economy, slumping house prices and falling consumer confidence, to “AA+” from “AAA”. This left Germany, Luxembourg and Finland as the only members of the 17-nation eurozone with the top rating from all three leading credit agencies.
However, it raised the outlook for Spanish debt to stable from negative and upgraded bailed-out Cyprus, highlighting diverging fortunes within the common currency bloc.
The fiscally conservative Dutch government has long been an ally of Germany in taking a tough line on the euro zone’s “budget sinners” which run large deficits.
Now, S&P has stripped the Netherlands of its coveted top long-term rating to reflect its bleak economic growth prospects, while Spain appears to be finally emerging from the depths of economic despair, albeit slowly.
Dutch Finance Minister Jeroen Dijsselbloem, who heads the Eurogroup of eurozone finance ministers, said he was disappointed by S&P’s decision but there would be few consequences for the cost of financing the country’s debt.
“The Netherlands is at the top of the world when it comes to financing itself. We pay very low interest rates, and there are very few countries that have a higher rating than we do,” he told RTL TV.
S&P said the Dutch decision was due to a worsening of growth prospects. “The real GDP per capita trend growth rate is persistently lower than that of peers at similarly high levels of economic development,” S&P said in a statement, while affirming the Netherlands’ short-term debt rating at A-1+.
A crisis in Italy and Spain has eased over the past six months but Europe is still struggling to achieve the economic growth it needs to bring down unemployment and deal with debt burdens that in some countries are above 100 percent of annual national output.
reuters
