By the Blouin News Business staff

Creditworthiness of rich governments crumbles

by in Global Economy.

Standard & Poor's signage

Photo Credit: AFP/GettyImages/Stan Honda

The creditworthiness of the governments of the developed economies has nosedived since the global financial crisis, according to an analysis by the Financial Times, causing a dramatic redrawing of the global credit ratings map:

The expulsion of the U.S., the U.K. and France from the “nine-As” club has led to the contraction in the stock of ­government bonds deemed the safest by Fitch, Moody’s and Standard & Poor’s, from almost $11 trillion at the start of 2007 to $4 trillion.

That is a contraction in the global pool of government bonds with triple-A status from the three main rating agencies of more than 60% since the financial crisis triggered a wave of downgrades across the advanced economies.

The most dramatic decline in credit ratings has been on the southern and western periphery of the euro zone. The most dramatic improvement has been in emerging markets, notably Indonesia and a block of South American countries led by Uruguay.

Change in notches of credit rating, March, 2013 vs January, 2007.
Biggest Upgrades Biggest Downgrades
Uruguay 3.7 Greece -11.0
Indonesia 3.0 Cyprus -10.7
Brazil 3.0 Portugal -8.7
Bolivia 3.0 Spain -8.7
Peru 2.7 Ireland -8.0
Source: FT