The credit ratings agency Moody's has slashed three of the four eurozone countries it previously ranked as stable triple-A, leaving Finland the last nation to hold the gold-plating rating. Germany, Luxemburg and the Netherlands have all been cut to negative outlook, indicating that the agency has strong fears that they will be forced to cut their ratings to Aa or lower in the near future.

The move has prompted bafflement from observers, since it seems to indicate that Moody's view Finland as less likely to default on its debts than Germany. The CRA has explained that it downgraded:

. . .Those triple A-rated euro area sovereigns whose balance sheets are expected to bear the main financial burden of support.

Which is all very well, except Finland is also expected to bear the burden of support, as all solvent eurozone nations are. But Moody's thinks that that isn't a concern, because:

Its small and domestically oriented banking system, its limited exposure to, and therefore relative insulation from, the euro area in terms of trade, and its attempts to collateralise its euro area sovereign support together provide strong buffers which differentiate it from the other Aaas.

As Slate's Matt Yglesias writes:

Try to sketch out a situation in which Germany is defaulting on its debts but Finland isn't because Finland has "collateral" from Spain. 

Are they marching an army across the entirety of Germany and France to collect this debt? No. No way. I don't think there's any real credit risk around Finland, but unless something wild changes in the realm of geopolitics, Finland will always be slightly riskier than Germany due to the fact that the Russians might invade and conquer Finland.

There has long been suspicion that ratings agencies are basically making it up as they go along. It's certainly the case that markets ignore their pronouncements when it comes to sovereigns, and it seems likely that they are actually incapable of giving a coherent narrative as to what they are actually ranking nations on.

But now they've gone and annoyed the Germans, writes the FT:

Moody’s judgments are likely to deepen anger in Germany and elsewhere at the decisions taken by rating agencies, which have faced calls for stricter regulation.

Whether or not regulation is forthcoming, this latest announcement makes it clear that credibility is nowhere to be seen.