Moody's Keeps EU AAA Rating, Changes Outlook to Negative

Moody's Investor Services has changed the EU outlook to negative but has kept the AAA rating with a caution.

The rating agency said the negative outlook reflects the union's key budget contributors and warned that the rating could be further downgraded.

Months back, Moody's put Germany, France, Netherlands, and the UK on negative outlook as the nations are struggling with their economies.

The rating agency also hinted if it downgrades four member states which account for 45 percent of the EU bloc's budget, it would directly result in downgrading the EU rating.

"Moody's believes that it is reasonable to assume that the EU's creditworthiness should move in line with the creditworthiness of its strongest key member states considering the significant linkages between member states and the EU, and the likelihood that the large AAA-rated member states would likely not prioritise their commitment to backstop the EU debt obligations over servicing their own debt obligations," said their statement.

It, however, added that the EU's negative outlook could be changed to stable if the four states' outlook changes.

The announcement said: "It is reasonable to assume that the EU's creditworthiness should move in line with the creditworthiness of its strongest key member states."

Europe's top leaders and bankers will be shuttling between places in the next few days for talks over the economy.

As the president of the European Union Herman Van Rompuy will travel to Berlin to meet German Chancellor Angela Merkel, Italian Prime Minister Mario Monti is all set to welcome French President Francois Hollande.

Their visits are taking place even as the president of the European Central Bank, Mario Draghi, said he would be comfortable buying three-year government bonds to ease the pressure on struggling nations.

Draghi is expected to make further announcements on 6 September.