EU's ratings affirmed by S&P, outlook negative

The European Union had its long- and short-term issuer credit ratings of AAA/A-1+ affirmed by Standard & Poor's Ratings Services, a week after the company cut the AAA ratings of France and Austria.

The outlook is negative because of "ongoing risks" for the Eurozone, S&P said. The long-term rating was removed from CreditWatch negative, where it was placed on December 7.

The European Union's revenues contributed by AAA-rated member states dropped to 33 per cent of 2011 budgeted revenues from 49 per cent before the January 13 downgrade. In last week's review, Germany and Slovakia were only two of the 16 countries that were given a stable outlook.

"Nevertheless, in our opinion, the supranational entity known as the EU benefits from multiple layers of debt-service protection sufficient to offset the current deterioration we see in member states' creditworthiness," Frank Gill, an analyst with S&P in London, said in the statement.

The negative outlook corresponds to the negative outlooks on 16 of the 27 member states, according to the statement.

"We could lower the ratings on the EU if the number of AAA rated member states decreases, or if the EU's headroom decreases compared with its annual debt service, or if member states default on payment obligations to the EU," S&P said.

The EU and the European Atomic Energy Community borrow on the capital markets under a joint 80 billion ($103.4 billion) euro medium-term note program to give loans or credit lines to member states, according to S&P.