Austria took issue on Tuesday with Moody’s warning it may strip the country of its top debt rating, saying the agency had not given proper credit to Vienna’s campaign to balance its budget and cut debt.
Moody’s said on Monday it may cut the triple-A ratings of France, Britain and Austria and it downgraded six other European nations including Italy, Spain and Portugal, citing growing risks from Europe’s debt crisis.
“The budget consolidation package just agreed was not given sufficient consideration in revising the outlook,” a finance ministry statement said.
“Moody’s assumes rising rates of indebtedness while the new deficit path shows debt rates clearly declining from 2012.”
Austria aims to balance the budget by 2016 via a mixture of spending curbs and tax hikes.
It now projects debt will fall to 71 percent of GDP by 2016 from a peak of 75.4 percent next year.
Noting Moody’s warning that it could downgrade Austria should the euro zone debt crisis worsen dramatically or domestic banks need more state aid, the finance ministry reiterated: “There are no signs at present that such support is needed.”
It said Austria’s financial sector was in the process of strengthening its capital base and that it expected Moody’s to take that into account for future evaluations.
Erste Group Bank, Raiffeisen Bank International and UniCredit’s Bank Austria unit are the leading lenders in emerging Europe.
Austrian regulators have said the domestic financial sector should shore up balance sheets, noting they are less well capitalised than international peers.
Austrian National Bank Governor Ewald Nowotny said the country’s fiscal consolidation programme marked an “important contribution” towards restoring market confidence.
“You have to see of course that this Moody’s report does not just refer to Austria, it refers to a significant part to overall developments in Europe. That means the savings package is just part of the overall perspective but it shows it was important to conclude this package,” he told Austrian radio.
Nowotny, who is also a European Central Bank policymaker, played down the risks from Austrian banks’ exposure to emerging Europe.
“It is certainly the case that we in Austria have a banking landscape that has very heavily engaged in central and eastern Europe and this is and was a success story. Of course risks are associated with this (but) I don’t think anything arises from the aspect of this engagement in central and eastern Europe.”
Source: Reuters
