Weak Growth: Agency Strips Netherlands' AAA Rating
The Netherlands lost its top credit rating on Friday as S&P moved to downgrade the country as a result of its weak economy. Holland had previously been a stable point in the euro crisis. Only 10 countries, including Germany, still retain AAA status worldwide.
The list of euro-zone countries with immaculate credit ratings took another hit this week. On Friday morning, Standard & Poor's (S&P) removed the Netherlands' top rating, downgrading the country to AA+. This leaves only three countries in the common currency area with the best grade of AAA: Finland, Luxembourg and Germany. Two years ago, six countries still had that rating.
Dutch Finance Minister Jeroen Dijsselbloem, who is also president of the Euro Group, recently announced that his country would violate the European Commission's deficit rules despite an additional 6 billion ($8.16 billion) austerity package.
Dijsselbloem has stated that he doesn't think the move by S&P will have any substantial effect on the interest rates the country pays on its debt. In a statement released Friday in The Hague, Dijsselbloem said he was "disappointed" by the downgrade, but that he didn't expect it to have any impact on interest rates because the markets were already expecting the change.
Like Germany, the Netherlands had long enjoyed a solid reputation for its stability in the euro crisis -- an image that could take a hit as a result of the downgrade. France, meanwhile, lost its top rating a year ago and was further downgraded early this month by S&P.
Germany's Top Rating also at Risk
Following the decision to downgrade the Netherlands, only 10 countries in the world still have the top AAA rating. Of these, only seven have been rated as "stable." The agencies are warning of a negative outlook for the three others, which includes Germany.
The agency attributed its decision to a general recovery of the Spanish economy as well as the country's austerity and reform efforts. On Thursday, it was announced that Spain had emerged from a more than two-year recession.
The analysts even expressed greater hope for Cyprus, raising the country's long-term sovereign debt rating from CCC+ to B-. S&P said the immediate risks to Cyprus' debt repayments appeared to have receded. Last year, Cyprus received a 10 billion international bailout in order to prevent insolvency. The condition for the euro bailout package was a restructuring of its bloated banking sector. The International Monetary Fund recently praised the country for progress in reforms.
dsl -- with wires
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