Ratings agencies wary of developments in Europe
THEY can determine how much a country pays for borrowing money on the markets and even lead to vital sources of lending being shut off.
The ratings agencies – including Moody's, Standard and Poor's and Fitch – and their letter-verdicts on a country's standing, can be powerful forces in the global economy.
The UK last week experienced just that. It is near the top of the table with the US and Germany for its ratings, but S&P has threatened its gold-plated sovereign credit. It was the third agency to downgrade its outlook for the UK to negative.
Moody's and Fitch already have the UK on "negative outlook" and plan to review its AAA status next year.
S&P, which has cut the US and France to AA+, said its decision reflected the weak recovery in Britain and sharply rising national debt.
Brian Barry of Investec Bank said whatever wriggle room the British authorities had, it's getting tighter.
"Whether that will translate into an actual downgrade in the immediate term, it's not immediately evident," he said.
The markets took the threat of downgrade in their stride when it first emerged, with Chancellor George Osborne attributing the soft reaction to the fact that they were "maintaining our commitment to deal with our debts".
If the downgrade comes true, all eyes will switch to see if market confidence remains. The US, of course, is the exception.
S&P downgraded its triple A credit in August 2011 amid tough negotiations over the debt ceiling, but Mr Barry said there was no effect on the markets. In fact, yields on treasuries actually fell.
"They are the ultimate safe haven of the world's premier reserve currency," Mr Barry said.
"They have quite a privileged position in terms of allocation of assets in terms of other currencies."
But that same certainty doesn't exist in Europe, even though Mario Draghi's Outright Monetary Transactions programme may have eased the fears of jittery investors.
But how the ratings agencies will view the main eurozone economies in 2013 will depend largely on events.
"How things play out over the next year will depend on whether we see a formal request for aid by Spain and whether that will be sufficient to underpin confidence in the Spanish bond market," Mr Barry said. "We also have the Italian election at the end of the first quarter. Anything that is move-able in terms of investor perception of risk would be a negative for Spain and Italy. For the moment the yields remain underpinned by a confidence that the ECB stands willing to intervene should the need arise."