S&P warns of possible downgrade of 15 euro nations

LONDON: Citing increased systemic risk in the region, Standard & Poor's has placed the sovereign ratings of 15 euro zone nations, including AAA-rated Germany and France, under 'CreditWatch' implying the possibility of downgrade.

The move overshadowed the optimism over the Franco-German meeting that mulled ways to bolster the sagging economic conditions in the euro area, a grouping of 17 countries that share the euro currency.

S&P has put 15 nations on 'CreditWatch' with negative implications, amid spiralling European debt turmoil that poses threat to the very existence of the currency union.

"CreditWatch placements are prompted by our belief that systemic stresses in the eurozone have risen in the recent weeks to the extent that they now put downward pressure on the credit standing of the euro zone as a whole," S&P Ratings Services said on Monday.

Tightening credit conditions, disagreements among European policy makers, high levels of government and household indebtedness, are among the reasons cited by S&P for keeping sovereign ratings on watch.

Among the 15 nations on the list, Austria, Finland, France, Germany, Luxembourg and Netherlands have ' AAA' tags -- the highest investment grade ratings. "(There is) rising risk of economic recession in the euro zone as a whole in 2012.

"Currently, we expect output to decline next year in countries such as Spain, Portugal and Greece, but we now assign a 40 per cent probability of a fall in output for the euro zone as a whole," S&P noted.