Britain, Austria and France could lose their triple A ratings, as rating agency Moody's placed the countries on negative watch, while lowering the ratings of six other Euro Zone nations. Italy, Malta, Portugal, Slovakia and Slovenia all had their ratings cut by one notch, with a negative outlook, while that of Spain was cut by two notches to A3, with a negative outlook.

Moody's actions follow those of Standard & Poors, which downgraded nine, and Fitch, which downgraded five European nations in January. At the heart of all their assessments is a questioning of Europe's ability to get the debt crisis under control. Now, within Europe, the only countries not to be placed on a negative watch by any of the ratings agencies are Germany, Denmark, Sweden and Norway.

Britain's debt

It was also the first time since the start of the Euro Zone crisis that Britain's outlook was impacted (S&P had placed Britain on negative watch in 2009). It means that the country could have its ratings lowered in the next 12 to 18 months.

Moody's attributed the outlook to concerns about Britain's debt burden, and the impact that the weak macroeconomic environment would have on the country's ability to keep lowering that debt. “Any further abrupt economic or fiscal deterioration would put into question the government's ability to place the debt burden on a downward trajectory by fiscal year 2015-2016,” the agency said in its report.

“It's a useful message for those getting on with the job of reducing the deficit to send to those opposed to those cuts and who see this as a time to encourage growth…,” said Howard Wheeldon, an independent macroeconomic analyst.

Market reactions

Market reaction to the downgrades – which came as little surprise to most investors — were muted. The pound fell 0.4 per cent against the dollar, while the euro fell 0.2 per cent.

Analysts said the downgrades were altogether less controversial than those of S&P, whose downgrade of France provoked a furious reaction in that country, and whose downgrade of Portugal to below investment status led to a large spike in yields and a fear that it was going to be the next Greece.

Moody's actions come ahead of a crucial meeting of Euro Zone finance ministers on Wednesday, at which a decision is expected to be made about whether or not to give Greece a second €130-billion bailout package.

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