Moody's downgrades five Dutch banks and warns on Greece

IN ANOTHER blow to the Netherlands’ minority-coalition caretaker government, the ratings agency Moody’s has downgraded the creditworthiness of five Dutch banks. It has also warned that a Greek exit from the euro could cause more shocks to the banking system.

Despite the fact that the Netherlands itself retains its triple-A international credit rating, Rabobank, ING Bank, ABN Amro, SNS Bank and the LeasePlan Corporation all had their ratings lowered – Rabobank to Aa2, ING and ABN Amro to A2, and the two smaller lenders, LeasePlan and SNS Bank to Baa2.

With just 12 weeks to a general election, Moody’s said the weak Dutch economy and falling house prices were the reasons for the decision, and issued this forecast: “Dutch banks will continue to face difficult operating conditions during 2012 and possibly beyond.”

ING shares rose 2.1 per cent in early trading, possibly out of relief that it wasn’t downgraded further because of its €38 billion portfolio of investments in Spain, many of them mortgage-linked.

On Thursday it said it plans this year to repay the €3 billion it owes the state after its 2008 bailout.

The Moody’s downgrade was in line with a central bank report earlier this week which said that economic growth would remain at a standstill until 2014 at least – with household incomes, household spending and house prices continuing to fall, and unemployment continuing to rise.

“This means that average incomes will not have increased between 2000 and 2013,” said Prof Job Swank, director of financial stability at the central bank. “It is extremely surprising not to see any increases in wages over 13 years.”

The OECD agrees, predicting that the Dutch economy will shrink by 0.6 per cent this year.

The downgrading of the banks overshadowed what should have been good news for the government – that the independent Central Planning Bureau (CPB) now says the five-party agreement on €13 billion worth of austerity cuts, reached in April, will officially bring next year’s budget deficit below 3 per cent of GDP, as required by euro zone rules.

The exact 2013 budget deficit figure will now be 2.9 per cent.

Finance minister Jan Kees de Jager, who brokered the agreement between the two government parties – the Liberals and the Christian Democrats, along with GreenLeft, D66 and Christian Unity – welcomed the analysis and warned a restive electorate that the cuts would ultimately benefit the country.

“We are doing this to strengthen the economy, to improve government finances and to retain the confidence of the financial markets,” he said.