PARIS — European politicians on Tuesday seized on the latest slew of credit downgrades and warnings to defend the need for painful budget cuts — in spite of a muted market reaction to the move by ratings agency Moody's.
Late Monday, Moody's Investor Service downgraded the ratings of Italy, Portugal and Spain, while France, Britain and Austria kept their top credit scores but had their outlooks dropped to "negative" from "stable."
The agency cited uncertainty over the eurozone's ability to enact reforms necessary to dig out of its debt crisis and Europe's weakening economy, which many fear is slipping into recession.
Investors seemed to largely shrug off the news on Tuesday, with Spain and Italy easily raising billions of euros in the debt markets more cheaply than they have recently. Borrowing costs for other affected countries stayed within normal ranges.
But the ratings still retain tremendous psychological significance for governments, and politicians eagerly twisted Monday's news to suit them on Tuesday.
In Britain, the move resurrected the long-running debate between a government determined to vigorously cut deficits and opposition claims that the cuts are too deep, too quick and motivated by political ideology, not economics.
Treasury chief George Osborne said the Moody's report was "another reminder Britain doesn't have some easy route out of the economic problems that have accumulated over the past decade" — a dig at the rival Labour Party, which ran Britain for most of that time.
Osborne said the move was a warning "that if we spend or borrow too much we are going to lose our credit rating but more importantly, what that leads to potentially is a loss of investor confidence in our economy."
But Ed Balls, economic spokesman for the Labour party, said austerity wasn't working in Greece or Ireland, and it wasn't working in Britain.
Yes, deficits need to be cut, Balls said. "That means tough decisions but unless you've got growth, if your plan is unbalanced, it becomes self-defeating and today is the first evidence that even the ratings agencies are waking up to the fact George Osborne's plan's not working."
A country's credit rating is meant to signal to investors how good a bet it is, while the outlook indicates which direction the agency believes the rating is headed in the next year and a half.
But the agencies have been criticized for issuing ratings that trail rather than anticipate market conditions. For instance, when Standard & Poor's stripped France of its top-notch AAA rating last month, many observers noted that Paris had long been paying higher costs to borrow money than most other AAA-rated countries — an indication the markets had already effectively downgraded the country.
The impact of the Moody's decisions may have been particularly muted given that they come on the heels of similar ones by the other two major agencies, Standard & Poor's and Fitch.
"The agencies are not telling us anything new and the subject of downgrades now seems to have become a political football to be knocked back and forth," said David Jones, chief market strategist at IG Index.
S&P's decision in January to downgrade France was a humiliation for the government, and the opposition Socialists have been hammering President Nicolas Sarkozy with that fact during the presidential election campaign.
After Moody's lowered its outlook for France, Finance Minister Francois Baroin passed off the move as merely a reflection of wider troubles in the eurozone. He was careful to point out that the agency cited the size, diversity and productivity of France's economy when it confirmed the country's rating.
In fact, Moody's also noted the size of France's debt — which stands at 85 percent of GDP, according to official EU statistics — and the government's difficulty in achieving deficit targets. Sarkozy's government has repeatedly revised down the country's growth forecasts in recent months, forcing it to also carve out new spending cuts to stay on track with its promise to balance its budget by 2016. Most recently it halved its expectation for economic growth this year to 0.5 percent.
Politicians in Austria, another of Europe's dwindling group of top-rated countries, likewise blamed their negative outlook on the eurozone.
Finance Minister Maria Fekter said the rating agency's move was "painful" but that it had to do with many factors that "we alone cannot shoulder."
She noted the decision did not take into account new debt-reduction measures that are up for a vote in Parliament in the next few days.
Elsewhere, though, there were signs of downgrade fatigue — the governments of Portugal and Italy, which have both endured multiple ratings cuts over the past months, made no comment.
Bob Barr in London, Ciaran Giles and Daniel Woolls in Madrid, George Jahn in Vienna, Colleen Barry in Milan and Barry Hatton in Lisbon contributed to this report.