S&P cuts EU credit rating after Brexit

July 01, 2016 | 13:00

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BRUSSELS: Ratings agency Standard and Poor's cut the credit rating for the European Union by one notch on Thursday (Jun 30), saying that the bloc had grown more uncertain after Brexit.

Ratings agency Standard and Poor's cut the credit rating for the European Union by one notch, saying that the bloc had grown more uncertain after Brexit. (AFP/Leon Neal)

"After the decision by the UK electorate to leave the EU as a consequence of the Jun 23 consultative referendum, we have reassessed our opinion of cohesion within the EU, which we now consider to be a neutral rather than positive rating factor," the agency said in a statement.

According to the statement, S&P cut the EU's rating to AA, still the third highest possible level, from AA+ with a stable outlook, which signifies that the agency believes no further cut would be necessary in the medium-term.

On Monday, both S&P and Fitch downgraded Britain's rating citing last week's referendum that decided an exit from the EU. S&P cut the country's rating from the top AAA to AA, while Fitch lowered its rating from AA+ to AA.

The agency said the relatively high rating for the EU "reflects our assumption that member states will fulfil" their budget obligations to the EU.

In 2016, Germany, France, and Britain respectively contributed 21 per cent, 16 per cent, and 13 per cent to the total EU budget.

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