February 12, 2009 / 4:04 AM / 10 years ago

Ireland, Spain most vulnerable triple-A nations -Moody's

 LONDON, Feb 12 (Reuters) - Spain faces sizeable risks to its
public finances and, along with Ireland, is among the most
vulnerable nation with a top credit rating, Moody's Investor
Services said in a report on triple-A rated countries on
 The report does not constitute a change in the rating or
outlook for any of the countries mentioned, Moody's said.
 The ratings agency said the UK, United States and Ireland
also face considerable challenges to their debt positions as
they loosen fiscal policy to fight recession.
 But the UK and United States have the scope to improve their
positions, which puts them in the "Resilient Aaa" category,
Moody's said, while Spain has only moderate means to improve its
fiscal standing. Ireland, which was put on "Aaa Negative
Outlook" last month, too has only moderate means to deal with
the considerable challenges facing its public finances.
 "Ireland's rebound potential -- and to a lesser extent
Spain's -- appears more disputable given the extent to which
their growth models are challenged," Moody's analysts said in
the report. 
 At the moment, Spain, the UK and the United States all have
"Aaa Stable Outlook" ratings from Moody's.
 In its report, Moody's outlined three groups to gauge a
government's ability to stretch its balance sheet while
remaining a safe investment destination: "Resistant",
"Resilient" and "Vulnerable".
 The "Resistant" category included Germany, France, Canada
and the four Scandinavian countries, whose ratings have so far
been untested.
 These countries have either entered the financial crisis
from a very strong position or have economic models that remain
robust, it said.
 The "Resilient" group comprises the United States and the
UK, whose ratings are being tested due to a shock to their
growth model and large contingent liabilities.
 But it added: "These countries display an adequate reaction
capacity to rise to the challenge."
 The size of the U.S. and UK economies, financial markets and
capital flows and relative debt levels to growth mean
policymakers have more scope to loosen fiscal policy without
endangering the public finances too much.
 Ireland and Spain fell into the third, "Vulnerable" group,
which refers to nations which are forced to take risks with
their public finances.
 Moody's singled out Ireland as facing particular risks,
given that it had a shorter timeframe in which it needed to
adjust its public finances given the severity of the impact of
the financial crisis on the government's fiscal positions, and
the more rapid deterioration of its balance sheet.
 Ratings agency Standard and Poor's in January downgraded
Spain's sovereign debt rating to "AA+" from "AAA" in January,
citing insufficient means to deal with weak growth and a
ballooning budget deficit.
 Below is a table of Moody's country breakdown of debt
challenges and adjustment capacity.
              Considerable    Moderate        Limited
              Debt            Debt            Debt
              Challenges      Challenges      Challenges
Adjustment       United States
Capacity         (Resilient)
                             Germany          Denmark
Sizeable         United         France           Finland
Adjustment       Kingdom        Switzerland      Luxembourg
Capacity         (Resilient)    Austria          Netherlands
                             (Resistant)      Norway
Adjustment     Ireland         Spain            New Zealand
Capacity        (Vulnerable)    (Vulnerable)     (Resistant)
 (Reporting by Naomi Tajitsu, editing by Victoria Main)

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