Italy, Spain Cut by Moody’s; U.K. Top Rank at Risk

Moody’s Investors Service cut the debt ratings of six European countries including Italy, Spain and Portugal and said it may strip France and the U.K. of their top Aaa ratings, citing Europe’s debt crisis.

Spain was downgraded to A3 from A1 yesterday, Italy to A3 from A2 and Portugal to Ba3 from Ba2, all with negative outlooks. Slovakia, Slovenia and Malta also had their ratings lowered.

“Policy makers have made steps forward but we do not think they have done enough to reassure the market that we are on a stable path,” said Alistair Wilson, chief credit officer for Europe at Moody’s in London.

Fitch Cuts Italian, Spanish Ratings

The credit ratings of Italy, Spain and three other euro-area countries were cut by Fitch Ratings, which said the five nations lack financing flexibility in the face of the regional debt crisis.

Italy, the euro area’s third-largest economy, was cut two levels to A- from A+.

The rating on Spain was also lowered two notches, to A from AA-.

Ratings on Belgium, Slovenia and Cyprus were also reduced, while Ireland’s rating was maintained.

The downgrades, flagged a month ago by Fitch, come as Greece negotiates with creditors on how to avoid a default and other euro nations struggle to bolster the region’s defenses against contagion should those talks fail.

Italy Sells Maximum EU11 Billion of Bills

11 billion euros ($14.5 billion) of Treasury bills today, meeting its target, and borrowing costs plunged from the previous sale.
The Rome-based Treasury sold 8 billion euros of 182-day bills at 1.969 percent, the lowest since May and down from 3.251 percent at the last auction of similar-maturity securities on Dec. 28.

Investors bid for 1.35 times the amount offered, down from 1.69 times last month. The Treasury also sold 3 billion euros of 331-day bills at a rate of 2.214 percent.

“Bond auctions in Italy are no longer nerve-wracking affairs,” Nicholas Spiro, managing director of Spiro Sovereign Strategy in London, said by e-mail.

Oil Declines

Standard & Poor’s cut France and Austria one level to AA+ from AAA last week and said they face the risk of further reductions. Spain and Italy were also among nine nations downgraded, while Finland, the Netherlands and Luxembourg kept their AAA ratings and were put on negative watch.

Crude oil for February delivery declined 0.4 percent to $98.70 a barrel in New York on Jan. 13, the lowest settlement since Dec. 21, after two European Union officials said an embargo on Iranian crude imports may be postponed for six months. The contracts dropped 2.8 percent last week. Gulf Arab oil exporters, including the U.A.E. and Qatar, supply about a fifth of the world’s oil.