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Moody's not impressed with EU fix

NEW YORK, Dec. 12 (UPI) -- Europe's debt crisis remains in critical condition, Moody's Investors Service said Monday.

One business day after European leaders agreed to tighter budgeting and creation of a central fiscal authority, Moody's said the crisis in Europe was at a "critical and volatile stage," The New York Times reported.

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The credit rating of several European Union member states was at risk, Moody's said, warning of possible downgrades.

Leaders in the European summit that ended Friday also agreed to funnel $268 billion more to the International Monetary Fund to assist debt-burdened countries and keep the contagion of debt problems from spreading further.

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"High levels of debt, the rising risk of a recession and tightening credit conditions are still with us after the summit and there was little in the way of real action to deal with any of them," said economic strategist Gary Jenkins at Evolution Securities.

Moody's on Friday lowered long-term ratings for three large French banks, Societe Generale, BNP Paribas and Credit Agricole despite the three passing bank stress tests administered by the European Banking Authority.

Moody's used stricter criteria dropping the rating for Societe Generale to A1, and the ratings for BNP Paribas and Credit Agricole to Aa3

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Each bank was downgraded one notch, leaving Societe Generale's rating in an upper-medium grade. BNP Paribas and Credit Agricole remain in a high grade.

On Monday, Moody's said, "The crisis is in a critical and volatile stage, with sovereign and bank debt markets prone to acute dislocation which policymakers will find increasingly hard to contain."

"Moreover, the longer the incremental approach to policy persists, the greater the likelihood of more severe scenarios, including those involving multiple defaults by euro area countries and those additionally involving exits from the euro area," Moody's said.

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