Moody's warns may cut AAA-rating for UK and France

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Germany's top-tier rating was described as "appropriate" by Moody's, and it affirmed the triple-A rating on the euro zone's bailout fund, the European Financial Stability Fund (EFSF).

Moody's, which said late last year it was reconsidering its European ratings, cut the ratings of Italy, Portugal, Slovakia, Slovenia and Malta by one notch. It downgraded Spain by two notches.

Moody's said the scope of the downgrades was limited due to "the European authorities' commitment to preserving the monetary union and implementing whatever reforms are needed to restore market confidence".

The announcement came a day after Greece's parliament approved a deep new round of budget cuts in the hope of securing new bailout funds and avoiding a chaotic default in March.

Bart Oosterveld, managing director at Moody's sovereign risk group, declined to comment on the state of the negotiations between Athens and its creditors, but said that if Greece were to leave the European Union the impact on financial markets and credit ratings "would be quite profound".

And he warned that European credit markets may still deteriorate despite efforts by the European Central Bank to ease financing pressures with its three-year refinancing operations.

"The markets are better in the short term but probably not in the longer term," Oosterveld told Reuters in an interview. "We think the markets remain quite fragile."

The rating outlooks of the nine countries affected by Moody's action was set to negative, "given the continuing uncertainty over financing conditions over the next few quarters and its corresponding impact on creditworthiness", Moody's said.

BRITAIN, FRANCE UNDER PRESSURE