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Moody's downgrades Slovenia

Moody's has downgraded struggling Eurozone country Slovenia, adding to anxiety that the country will soon have to seek a bailout. Germany, in contrast, has received better news; confirmation of its continued AAA status.

The ratings agency Moody's downgraded the creditworthiness of Eurozone country Slovenia on Thursday, adding that the outlook for the country remained negative.

Moody's downgraded Slovenia three notches overall, from "A2" to "Baa2." The country is now only two steps above junk status.

The agency attributed the poor rating to the sluggish pace of reforms in Slovenia, its rising budget deficit and the enduring risks in its banking sector.

The verdict is likely to add fuel to rising speculation that Slovenia will need a bailout; commenting on the decision, Moody's stated that the deterioration of the economic environment in Slovenia is increasing the likelihood that it will have to seek external assistance in the future.

There has been speculation for some time that the small, export-oriented Southeastern European state, which was badly hit by the global economic crisis, will join Greece, Ireland, Spain, Portugal and Cyprus as a member of Europe's swelling club of bailed out countries.

Germany wins back some credibility

Meanwhile, Germany received better credit-related news on Thursday, when ratings agency Standard & Poor's (S&P) confirmed the country's AAA ranking.

S&P cited the country's "strong economic fundamentals" as key to its decision.

"Germany has a highly diversified and competitive economy with a demonstrated ability to absorb large economic and financial shocks," it elaborated in the statement.

Moody's sign

Moody's sparked controversy last week when it cut its outlook for Germany to negative

It was a welcome development for Berlin after Moody's, in a shock decision last week, cut the outlook for Germany from "stable" to "negative."

Moody's said its decision was based on rising uncertainty regarding the outcome of the eurozone debt crisis and a Greek exit from the 17-nation currency area.

"There is an increasing likelihood that greater collective support for other euro area sovereigns, most notably Spain and Italy, will be required," Moody's had warned, suggesting that this might drag down Germany, too.

sej/rg (dpa, AP, Reuters, AFP)