Standard & Poor's this morning cut its long-term credit rating on the European Union to AA-plus from AAA, citing rising tensions on budget negotiations. The move follows cuts to the ratings of EU member states in recent months.

“In our opinion, the overall creditworthiness of the now 28 European Union member states has declined,” S&P said in a statement.

“In our view, EU budgetary negotiations have become more contentious, signaling what we consider to be rising risks to the support of the EU from some member states.”

The ratings agency said cohesion among EU members had lessened and that some might baulk at funding the EU budget on a pro-rata basis.

S&P has had a negative outlook on the EU since January 2012 and has since cut its ratings on members France, Italy, Spain, Malta, Slovenia, Cyprus and The Netherlands.

As of this month,the EU had outstanding loans of €56 billion, according to S&P.

The credit-rating agency said its downgrade of The Netherlands last month left the EU with six AAA-rated members. Since 2007, revenues contributed by AAA-rated sovereigns as a proportion of total EU revenues nearly halved to 31.6 per cent, it added.

Reuters