Global Credit Research - 22 Dec 2011
Frankfurt am Main, December 22, 2011 -- Moody's Investors Service has today downgraded Slovenia's local- and foreign-currency government bond ratings by one notch to A1 from Aa3 with a negative outlook. Today's rating action concludes Moody's review for downgrade of Slovenia's sovereign debt ratings, which was initiated on 23 September 2011.
The main drivers that prompted the downgrade are:
(1) Risks and uncertainties for the Slovenian government's balance sheet stemming from the potential need for further support to banks due to increasing pressure on asset quality, capitalisation and funding among the largest banks in the system.
(2) Increasing medium-term risks to economic growth for the small and very open Slovenian economy resulting from the need for ongoing deleveraging and fiscal restriction in the euro area. This is likely to add to the challenges of placing the country's public debt ratios on a downward trajectory.
(3) Heightened risks posed by the sustained deterioration in government funding conditions due to the euro area sovereign debt crisis.
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