Credit agency Standard & Poor's cut its long-term rating of the European Union by one notch from triple A to AA+ on Friday, saying it had concerns about how the bloc's budget was financed, a view EU leaders and other officials dismissed as misguided.
The agency said in statement a decline in "creditworthiness" and contentious budgetary negotiations of the 28-member bloc were to blame for the downgrade, 11 months after it announced it had a 'negative' outlook on the bloc.
European officials said they were not surprised by the move since Standard & Poor's recently downgraded the Netherlands and has lowered its view on six other member states — France, Italy, Spain, Malta, Slovenia and Cyprus — in the past year.
But they pointed out that the EU has no debt or deficit to speak of and its budget is a stand-alone entity financed by 28 countries, making it one of the most stable institutions and most reliable borrowers in the world.
Belgian Prime Minister Elio Di Rupo said the agency's opinion had to be put in perspective, adding it was still giving good grades shortly before the 2008 economic crisis.
"I think that this is an analysis carried out by experts who once said everything was fine and that was before the banking crisis hit. So we have to put opinions into perspective. An opinion remains an opinion," Di Rupo told reporters as he arrived for an EU summit in Brussels.
European Commission President Jose Manuel Barroso said he disagreed, describing the EU as "credible."
"We believe that the European Union as such is indeed a very credible, an extremely credible financial institution, when it comes to financial obligations. As I said, I don't know many around the world that have zero debt and zero deficit and the record of the European Union is perfect. There was never a case of failing any commitment," Barroso said.
French President Francois Hollande criticized the logic of downgrading the credibly of an institution with no debt or deficit, relying on members' contributions.
"It's rather strange to announce the downgrade of the European Union, even if the grade remains good, when the EU barely issues bonds -- aside perhaps for development loans. So it will have no impact," Hollande said.
"And then, the other argument is that it's getting harder and harder to design European budgets, not national budgets but the European budget. That's true. But in that case they should have downgraded it throughout the history of the European Union because it has always been difficult to agree the budgets."
Another argument is to say that some countries can't pay any more.
"Well, if there are countries that can't pay their contributions to the European Union any more I think they're the ones who are going to be downgraded," Hollande said.
In its statement, the credit agency said cohesion among EU member states had weakened and that some countries might baulk at funding their contributions to the budget in the years ahead.
The EU budget is financed by contributions from all member states based on gross domestic product. It is set for seven-year periods, although there is also an annual negotiation to decide on the precise spending for the next year.
The most recent seven-year budget, which runs from 2014-2020, was agreed in December and sets a spending ceiling of around 1 trillion euros, equivalent to slightly less than one percent of total EU output.