S&P downgrades European Union

S&P said it lowered the long-term issuer credit rating on supranational institution, the European Union, to AA from AA+.

The A-1+ short-term rating also was affirmed.

The outlook is stable.

The downgrade stems from a view that the U.K. government's declared intention to leave the union lessens the supranational's fiscal flexibility and reflects weakening political cohesion, S&P said.

As a consequence of the decision by the U.K. electorate to leave the E.U. following the June 23 referendum, the agency said it reassessed a previously favorable opinion of solidarity within the E.U. to neutral from positive, the agency said.

The previous baseline scenario considered that all 28 member states would remain inside the E.U., S&P said.

While the remaining 27 members are expected to reaffirm their commitment to the union, the agency said it thinks the U.K.'s departure will inevitably require new and complicated negotiations on the next seven-year budgetary framework.

Going forward, revenue forecasting, long-term capital planning and adjustments to key financial buffers of the European Union will be subject to greater uncertainty, Fitch said.

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