Tags: EU | Europe | Financial | Crisis

Moody's: Debt Crisis May Hurt Banks Outside Greece

Thursday, 06 May 2010 08:49 AM EDT

The debt crisis enveloping Greece could spread to hurt the banking systems in Portugal, Italy, Spain, Ireland and Britain, a leading credit ratings agency warned Thursday.

Moody's Investor Service said that although banks in some countries, such as Portugal and Italy, were not heavily affected by the past years' financial crisis, they could be impacted by the fiscal crisis if it spreads outside of Greece.

"A key factor determining whether contagion risk continues in this case will be the market's view of the likely success or otherwise of the recently agreed International Monetary Fund and European Union support package for Greece," the agency said.

That bailout offers the debt-ridden country 110 billion euros ($142 billion) in loans over three years from the IMF and the other 15 countries that use the euro. Greek lawmakers were to vote Thursday on austerity measures required by the rescue, and the bill was widely expected to pass despite violent protests that culminated in three deaths this week.

Moody's said the banking systems of Portugal, Italy, Spain, Ireland and Britain all face different challenges of different types, but warned that "contagion risk could dilute these differences and impose very real, common threats on all of them."

The banking systems of Portugal and Italy, like that of Greece, were not hit too hard by the global financial crisis, but their huge public debt load is remains threat. Banks in Spain, Ireland and the U.K. were more exposed to the credit crunch and have weakened their countries' finances significantly over the past year, the agency said.

Thursday's report comes only a day after the ratings agency put Portugal on watch for a possible downgrade of its sovereign debt and a week after rival Standard & Poor's downgraded Greece's government bonds to junk status.

With markets worried that Greece's debt crisis could deteriorate and spread, eyes are turning Thursday to the European Central Bank, which will hold a press conference after its meeting on interest rates. Some analysts say the bank could try to boost market sentiment with a bold move, such as buying government bonds.

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FinanceNews
The debt crisis enveloping Greece could spread to hurt the banking systems in Portugal, Italy, Spain, Ireland and Britain, a leading credit ratings agency warned Thursday.Moody's Investor Service said that although banks in some countries, such as Portugal and Italy, were...
EU,Europe,Financial,Crisis
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2010-49-06
Thursday, 06 May 2010 08:49 AM
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