Europe, Debt | featured news

Greece is unlikely to be able to pay what it owes and further debt restructuring is likely to be necessary, three EU officials said on Tuesday, a cost that would have to fall on the European Central Bank and euro zone governments.

Moody's Investors Service Friday defended its decision to issue a slew of downgrades to Europe's biggest lenders after several of the continent's banks hit out over the "backward" nature of the review.

Credit ratings agency Moody's Investors Service cut its rating on Spanish government debt on Wednesday by three notches to Baa3 from A3, saying the newly approved euro zone plan to help Spain's banks will increase the country's debt burden.

Moody's on Friday cut Belgium's credit rating by two notches, saying the euro zone debt crisis increases funding risks for countries with high public debt burdens.

Monday's euro-zone downgrade warning by Standard & Poor's Ratings Services is a muscular move by a firm that was pilloried for its supposed laxity in the financial crisis. S&P put the long-term sovereign-debt ratings of 15 euro-zone nations, including struggling Italy and Spain, on negative watch. That typically means there is at least a 50% chance of a downgrade within 90 days, but the firm said Monday that it expected to announce any rating changes "as soon as possible" following this week's European Union summit, where policy makers are expected to lay out plans to enforce stricter budget rules.

After a series of positive announcement from Greek FinMin Venizelos, rumors that Moody's would downgrade French banks and Germany was preparing for a Greece to default send equities tanking, particularly French banks.

A top board member of the European Central Bank unexpectedly resigned on Friday in what analysts saw as further evidence of the deep divisions over how to resolve Europe’s growing debt crisis. The move immediately rattled European markets and the euro, which slipped to a six-month low against the dollar. The European Stoxx and German DAX indexes tumbled 3.5 percent.

Italy and Spain pass new measures as they battle to control their debts while Greece steps up its austerity plans.

By insisting that it receive collateral from Greece in return for aid, Finland threatens to upend an agreement that euro zone countries made in July to expand the E.U. bailout fund.

Fitch Ratings on Wednesday downgraded Greece deeper into junk territory, citing the absence of a new and fully funded financing program for the country.