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European Union

Ratings agency S&P downgrades EU

The European Union's top long-term credit rating has been downgraded by the agency Standard & Poor's, citing what it called lessening cohesion. The dip to AA+ coincides with an EU summit in Brussels.

S&P downgrades EU rating

The rating agency S&P on Friday trimmed its assessment of EU creditworthiness a notch from a high AAA to AA+. It said 80 percent of the EU's loans were monies lent to bailout member states such as Ireland and Portugal.

The agency said, while the outlook was stable, it had adjusted its assessment because it considered the EU's "financial arrangements to have deteriorated, and that cohesion among [member states] has lessened."

"The Commission disagrees with S&P that member state obligations to the budget in a stress scenario are questionable," EU Economic Affairs Commissioner Olli Rehn said in reply. "All member states have always and also throughout the financial crisis provided their expected contributions to the budget in full and in time."

S&P had praise for Ireland, saying its bailout recovery could lead to a rating upgrade "in the next 18 months."

Summit enters 2nd day

A summit of the 28-member bloc entered the second and final day in Brussels on Friday after leaders endorsed a precautionary scheme for winding down troubled banks.

That is still subject to negotiations with the European Parliament, whose president Martin Schulz said emergency procedures planned were too cumbersome.

Growth for the 17-member eurozone, comprising the countries which use the euro currency, is predicted to tally a fragile 1.1 percent for 2014. Average unemployment is expected to remain high at 12.2 percent.

Also on Thursday, thousands of demonstrators drawn from trade unions and non-governmental organizations protested in Brussels, citing austerity measures in EU member states and social injustices.

For the last five years the EU, and the eurozone with 17 members, have used bailout funding and institutional reforms to avert potential break-up.

The crisis, caused by national debt and bad bank lending, left some countries, notably Greece, Ireland and Portugal, dependent on bailouts by international lending institutions.

ipj/kms (dpa, APF, AP)

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