S&P revises outlook on European Union to negative

Credit rating agency lowers outlook on European Union amid unhealthy decisions which could de-stabilize its economy

Photo by: Reuters
Photo by: Reuters

Standard & Poor's has changed its outlook for the European Union from stable to negative after the bloc's support for Greece and following Britain's decision to vote on leaving the EU, S&P reported Monday.

The decision means the US ratings agency could lower its grade of the European Union -- now at AA+ -- in the next two years.

"The EU's repeated use of its balance sheet to provide high risk financing to EU member states (most recently Greece), without the member states "paying in capital," was one reason behind the revised outlook, S&P said. 

The agency also said it expected the European bloc would provide first-loss guarantees for lending under the so-called Juncker Plan. 

Named after the head of the European Commission, Jean-Claude Juncker, the stimulus plan is expected to roll out 315 billion euros over three years.

S&P's concern over Britain is due to its outsized role within the 28-member EU.

Together Britain, Germany and France are the largest contributors to the EU budget -- about 70 percent between them.

Conservative British Prime Minister David Cameron has said he will campaign for Britain to stay in the European Union if he can renegotiate its terms of membership to strengthen British sovereignty.