Moody’s said the eurozone crisis threatened the sovereign ratings of all nations in the region.

In a note the credit agency reported.

The continued rapid escalation of the euro area sovereign and banking  credit crisis is threatening the credit standing of all European sovereigns,  cautions Moody’s Investors Service in a new Special Comment.  In the absence of policy measures that stabilise market conditions over  the short term, or those conditions stabilising for any other reason,  credit risk will continue to rise. Moody’s new report notes  that, amid the increasing pressure on euro area authorities to act  quickly to restore credit market confidence, the constraints they  face are also rising. While the euro area as a whole possesses  tremendous economic and financial strength, institutional weaknesses  continue to hinder the resolution of the crisis and weigh on ratings.  In terms of the policy framework, the euro area is approaching a  junction, leading either to closer integration or greater fragmentation.

Moody’s added:

• The probability of multiple defaults (in addition to Greece’s  private sector involvement programme) by euro area countries is no longer  negligible. In Moody’s view, the longer the liquidity  crisis continues, the more rapidly the probability of defaults will  continue to rise.

• A series of defaults would also significantly increase the likelihood  of one or more members not simply defaulting, but also leaving the  euro area. Moody’s believes that any multiple-exit  scenario — in other words, a fragmentation of the euro — would have negative repercussions for the credit standing of all euro  area and EU sovereigns.

Douglas A. McIntyre