A SECOND ratings agency has indicated that it may downgrade its ratings of the EU member states – raising further question marks about the effectiveness of the deal struck by EU leaders last week.

In a brief statement this morning, Moody’s said it would revisit its ratings of all European countries in the first quarter of 2012, with the ongoing European debt crisis “in a critical and volatile stage”.

“The absence of measures to stabilise credit markets over the short term means that the euro area, and the wider EU, remain prone to further shocks and the cohesion of the euro area under continued threat,” Moody’s said.

The agency also argued that the deal reached by leaders in Brussels last week – where 26 European countries are set to sign up to stronger financial oversight rules – “offers few new measures”.

Many of the measures announced last week, it said, “are similar to previously announced ones”.

The warning follows that of Standard & Poor’s, which announced ahead of last week’s summit that it was putting every European Union country on ‘creditwatch negative’ – indicating a 50-50 chance that each country could have its rating downgraded in the next 90 days.

While stock markets have reacted somewhat positively to last week’s deal, bond market traders have indicated that the crisis is not yet over.

Though the cost of borrowing for the UK – which was the only EU member not to back last Friday’s deal – has fallen this morning, the costs of borrowing for Spain has risen to 5.9 per cent, and for Italy to above 6.5 per cent.

Moody’s is the only one of the three major credit ratings to rank Ireland at ‘junk’ status.

Explainer: Why would Ireland stick with the euro?

S&P puts whole of European Union on notice of possible downgrade

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