Standard and Poor's warns of south eurozone downgrade

(LONDON) - Standard and Poor's warned Tuesday it might downgrade the ratings of southern eurozone members this year, but added it was still an advantage for these countries to remain in the single currency.

"In our view the risks to the ratings will remain firmly on the downside during 2010, extending a negative trend that began during the middle of the past decade," said credit analyst at the agency, Moritz Kraemer.

In a report on southern members of the eurozone, the rating agency said the chances for countries such as Greece, Portugal and Spain to export their way back to stability had been hit by the lack of demand in key trading partners.

Kraemer added that instead of using low eurozone interest rates to bolster their balance sheets in the past, southern members of the single currency had boosted public sector spending or cut taxes.

These countries were likely to remain highly indebted for years, said the agency.

But Standard and Poor's added it was still in these countries' interests to stay with the euro.

The agency pointed to "benefits of being a member of the single currency, including more affordable refinancing costs and protection from traditional balance-of-payments crisis."

"We feel these advantages support creditworthiness," it added.