Greek crisis sends Europe's ratings plummeting

The European crisis is sending the ratings of the region's borrowers tumbling at the fastest pace ever relative to the United States as concern that governments will not be able to pay their debt affects companies and banks.

Standard & Poor's lifted the ratings of 118 European issuers in the first half and cut 205, for an upgrade-downgrade ratio of 0.58, according to Bloomberg analysis.

In the US, S&P upgraded 380 borrowers and lowered 165, a ratio of 2.3 - the biggest contrast between the two regions for a first half ever.

Concern that Greece's debt woes would translate into the euro region's first national default spread contagion through its neighbours, while in the US the second round of quantitative easing - which came to an end last week - buoyed credit quality.

The difference between the regions has also been affected by S&P, Moody's Investors Service and Fitch Ratings changing the way they assess European borrowers in particular, including lowering their assumptions for the state support lenders can expect.

Moody's ratings data show a similar trend to those of S&P, with 306 downgrades and 94 upgrades in Europe in the first six months of this year, compared with 161 downgrades and 231 upgrades in the US.

Junk-rated companies poised for upgrades to investment-grade status are dominated by US entities, says Diane Vazza of S&P in New York.

She said the US accounted for eight out of 20 so-called rising stars, compared with three in Europe.

Greek lawmakers' approval of spending cuts last week paved the way for the debt-ridden nation to get the next instalment of its international bailout.

Greece may now receive as much as €85 billion ($148.78 billion) in new financing, on top of the €110 billion pledged last year, under its second rescue package, according to an Austrian Finance Ministry official.

Greece was cut by S&P three times this year to CCC, eight steps below investment grade, as the country skirted a default that threatened to bankrupt its financial system and infect economies in Europe and beyond. The sovereign crisis has affected the region's banks, which hold about US$52.3 billion ($63 billion) of Greek government bonds, more than their US peers, which have US$1.5 billion, according to the Bank for International Settlements.

Governments worldwide have pumped more than US$1.6 trillion into their lenders since 2007, Bloomberg data show. The likelihood that they will be unable or unwilling to do so again is forcing ratings firms to adjust their criteria.

- BLOOMBERG