Moody’s: EU Not Prepared for Another Financial Crisis, Populist Parties Benefit From Stagnation

A sign for Moody's rating agency is displayed at the company headquarters in New York, September 18, 2012. AFP PHOTO/Emmanuel Dunand / AFP / EMMANUEL DUNAND (Photo credit should read EMMANUEL DUNAND/AFP/Getty Images)

Credit rating agency Moody’s has warned that European nations are ill prepared for another financial crisis and that should one occur they predict a significant rise in support for anti-establishment populist parties.

While the rating agency has noted some improvements in Europe since the 2008 financial crisis, the organisation has serious concerns about how the political establishment could handle another, Il Giornale reports.

“Europe remains vulnerable in economic terms because debt has grown, there are fewer instruments to encourage recovery, financial asset prices are high, political and regulatory risks are increasing and innovative technologies are testing more and more sectors,” Moody’s Senior Vice President Paolo Leschiutta said.

“Overall the room for manoeuvre to reduce the effects of another recession is shrinking,” he added.

The Moody’s report claims that several factors from high private and public debt to Europe’s ageing population could make recovery harder and that the solutions to the past crisis have reduced the ability of governments to react to a new one.

Populist anti-establishment parties, such as the ruling League-Five Star Movement coalition in Italy, would, according to Moody’s, benefit from another financial crisis.

“Low growth rates and high unemployment rates worsen insecurity in some countries, favouring anti-establishment movements, which could become even more popular should another crisis break out,” the report said.

Investment firm Goldman Sachs, which became well-known globally during the 2008 crisis, also issued a warning this week about the Italian government saying that new spending packages, largely backed by the Five Star Movement, could harm the country’s credit rating. The warning comes after increased pressure from the European Union against the Italians, as well.

Due to a lack of a European solution to the country’s migrant problems, Five Star Movement leader Luigi Di Maio threatened to cut off Italian funding to the political bloc sparking a wave of criticism and accusations from several European Union Commissioners that the populist coalition and other anti-establishment parties in Europe were trying to “destroy” the EU.

Follow Chris Tomlinson on Twitter at @TomlinsonCJ or email at ctomlinson(at)


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