Markets are closely watching rating agencies next moves, where major rating agencies in the world threatened the euro-area region with a possible downgrade in case European leaders were not able to quell jitters and meet market speculation with a strong plan to tackle the debt crisis once and for all.
However, the European Summit ended last week, while rating agencies started to comment on the summit deal, which contained providing 200 billion euros of bilateral loans for the International Monetary Fund in order to support the facility to provide aid packages for struggling nations. The deal also contained running the European Stability Mechanism along with the European Financial Stability Facility in order to double the firepower of the rescue fund.
Yet, pessimism dominated the market as the European Central Bank was ruled out from the deal, where the ECB President, Mario Draghi said that the Bank is not allowed and will not be involved in providing European governments with direct financing and will not buy indebted bonds.
The U.S. rating agency, Moody's Investors Service explained on Monday that the agency intends to review the rating of the entire European Union in the first quarter of the next year, where the agency clarified that European leaders provide few new measures to tackle the two-year debt crisis.
As we announced in November, unless credit market conditions stabilize in the near future, our ratings of all EU sovereigns will need to be revisited, the agency explained in the weekly report. We continue to expect to complete such a repositioning during the first quarter of 2012.
Standard & Poor's threatened the euro area region before the summit with a possible downgrade, yet the agency still didn't comment on the summit, while the decision is expect anytime this week.
Fitch Ratings agency also provided negative comments regarding the European summit, where the agency said despite the new treaty reached for a deeper economic integration, European leaders failed to provide a comprehensive solution to solve the debt crisis, which in result added more pressures on the euro-area region credit rating.
It means the crisis will continue at varying levels of intensity throughout 2012 and probably beyond, until the region is able to sustain a broad economic recovery, Fitch said in a statement.