Moody’s Investors Service assigned a long-term issuer rating of Aaa and a short-term issuer rating of Prime-1 to the European Stability Mechanism (ESM). The outlook is negative, the ratings service said:
The Aaa/Prime-1 ratings are based on (i) the ESM’s anticipated low leverage, (ii) the creditworthiness of the ESM’s members which are also the euro area member states, (iii) the sound liquidity and capital management policy with an Early Warning System (EWS) which ensures that funds will be available on time, and (iv) the ESM’s preferred creditor status. The ESM’s purpose is to provide an inter-governmental support mechanism which extends financial assistance to members that are either unable to access the capital markets, or able to do so only at very high interest rates.
The negative outlook on the ESM’s Aaa rating reflects the negative outlooks on all but one of its Aaa-rated member states and guarantors. The Aaa-rated member countries that currently have a negative outlook include some that have significant contribution keys, such as Germany (which holds a 27.1% share in the subscribed capital), France (20.4%) and the Netherlands (5.7%). The only Aaa-rated ESM member that has a stable rating outlook is Finland, whose contribution key is 1.8%.
Douglas A. McIntyre