S&P downgrades EU credit rating after Brexit

The American financial services company, Standard and Poor’s, has cut the credit rating of the European Union after last week’s referendum by the United Kingdom to leave the union.

The credit ratings agency said on Thursday it had cut its long-term credit rating on the EU to ‘AA’ from ‘AA+’ the bloc has lost its status as a safe haven for investments.

S&P said the UK’s exit from the EU would complicate budgetary and policy priorities among the remaining 27 members, which could weaken the bloc’s fiscal stability.

“Going forward, revenue forecasting, long-term capital planning, and adjustments to key financial buffers of the EU will in our view be subject to greater uncertainty,” S&P said.

On Monday, S&P downgraded Britain’s credit rating by two notches, from AAA to AA, a humiliating blow for the country and one that could cost its economy.

S&P was the last of the big three ratings agencies to have a blue-chip rating on the UK’s credit-worthiness. Moody’s, which stripped the UK of its top-notch rating following the austerity cuts of 2013, said last week it might further downgrade UK’s credit rating.

Britain’s vote to exit the EU, known as Brexit, has plunged global markets into turmoil.

The vote has had a detrimental effect on the global economy. It has wiped a record $3 trillion off global stock market shares and the pound fell to its lowest level in 31 years against the dollar.

In the June 23 referendum, some 52 percent of British voters opted to leave the EU, while roughly 48 percent of the people voted to stay in the union. More than 17.4 million Britons said the country should leave the bloc, as just over 16.14 million others favored remaining in the EU.

The British departure has triggered concerns that other EU nations may follow, challenging the political fabric of an alliance that has been constructed among nearly thirty very different countries.