Dutch credit rating slips as Spanish efforts praised
Standard & Poor's agency cut the Netherlands' credit rating yesterday, reducing the eurozone club of full triple-A nations to just three, while rewarding Spain for efforts to reform its public finances.
S&P lowered the Netherlands, which is suffering from an anaemic economy, slumping house prices and falling consumer confidence, to AA+ from AAA. This left Germany, Luxembourg and Finland as the only members of the 17-nation eurozone with the top rating from all three leading credit agencies.
However, it raised the outlook for Spanish debt to stable from negative and upgraded bailed-out Cyprus, highlighting diverging fortunes within the common currency bloc. Ireland was left unchanged.
The fiscally conservative Dutch government has long been an ally of Germany in taking a tough line on the eurozone's 'budget sinners', which run large deficits.
Now, S&P has stripped the Netherlands of its coveted top long-term rating to reflect its bleak economic growth prospects, while Spain appears to be finally emerging from the depths of economic despair, albeit slowly.
Dutch Finance Minister Jeroen Dijsselbloem, who heads the Eurogroup of his eurozone peers, said he was disappointed by S&P's decision. However, he told reporters there would be few consequences for the cost of financing the country's debt as interest rates on Dutch state bonds remained very low.
Yields on the 10-year Dutch government bond were 2.02pc after the announcement.
Mr Dijsselbloem said the only way for the Netherlands to win back its top rating was to tackle structural weaknesses in the economy with reforms of healthcare and pensions, as well as the labour and housing markets.
The country was pulling out of recession, he said. "Even though we are moving out of the crisis – we will have growth next year – it's still too low.
"We have to get higher figures in order to become a triple A country again, which is of course our ambition," he said, adding that the government would not try to stimulate growth by easing off on the budget.
"There is still broad support for quite tight budget discipline, so there is absolutely no reason to loosen the reins where budget discipline is concerned," he said.
S&P said the Dutch decision was due to a worsening of growth prospects. (Reuters)