08.08.11 European countries ripe for downgrades – FRANCE next

European countries ripe for downgrades

August 8, 2011, 11:42 AM

The U.S. will probably be accompanied by other countries losing their AAA credit ratings and several European states are ripe for downgrades, according to a report from Brown Brothers Harriman released Monday.

Analysts pointed to the U.K. as a candidate for downgrades as growth prospects for the Brits are dimming. “We think the rating agencies will take another look at the U.K.’s AAA standing and start to talk about downgrades,” the analysts said.

France’s AAA credit rating was also put in the downgrade spotlight, because it has weaker credit than the U.S. by most metrics. “The recent move to downgrade some French banks due to heavy exposure to Greece is likely a warning shot that will be followed up with sovereign pressures in the future,” said the analysts in a note. Belgium stands to lose its AA+ rating while Spain, Italy, Ireland and Portugal are all facing “significant downgrade risk,” leaving Greece at C ratings as the only country that is close to correctly rated, according to the BBH analysts.

“The dollar bloc, the Scandinavian countries, and Switzerland are left as very solid AAA countries, along with the Netherlands and Luxembourg.  But taken together, these countries are a very small slice of global GDP and so investors have few options with regards to AAA safe havens,” they said.

-Sara Sjolin