A joint bond issue by eurozone countries would get the weakest member''s rating if the issue was jointly guaranteed, the head of Standard & Poor''s European sovereign ratings said on Saturday. S&P was not in talks with the European Union about the idea because that would present a potential conflict of interest, Moritz Kraemer, managing director, EMEA sovereign ratings, told a panel discussion at the Alpbach Forum economic.
Kraemer said his understanding was that joint euro bonds would be structured along the lines of Germany''s jumbo bonds, in which federal states team up to issue debt and each guarantees its own bit. "If the euro bond is structured like this and we have public criteria out there then the answer is very simple. If we have a euro bond where Germany guarantees 27 percent, France 20 and Greece 2 percent then the rating of the euro bond would be CC, which is the rating of Greece," he said.
"If it is a joint and not a several guarantee then it would be the weakest-link approach, as we call it," he added. "Possibly this could be structured in a different way. I don''t know because.we are not in talks with the EU. It is not our task to help structuring or advising. We don''t do this again to prevent conflict of interest," he said.
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