Britain's AAA credit rating was thrown into doubt after the ratings agency Moody's said the ongoing euro crisis and a credit squeeze on the banking sector put the country at a higher risk of defaulting on its debts.

Moody's credit agency has cut the credit ratings of nine
European countries including the U.K.
Photograph: Joel Saget/Getty

Moody's said that countries including the U.K., France and Italy would be put on negative watch after citing "uncertainty" over Europe's handling of its ongoing debt crisis. Moody's negative outlook also extended to Austria, Italy, Portugal, Spain, Slovakia, Slovenia and Malta.

The possible loss of the U.K.'s much coveted triple-A status will be a bitter blow for the chancellor George Osborne who has staked his reputation on distancing Britain from the ailing euro zone.

Riots and looting on the streets of Athens highlighted the confusion at the highest levels of the European political establishment over how to deal with the mounting debts faced by Greece. Brussels rejected handing over €130 billion without further commitments from the Athens parliament and proposals for further cuts to be implemented this year.

Osborne was expected to stick to his aim of reducing Britain's "structural deficit" by 2017 when he stands up in parliament next month to deliver his third budget since the coalition took power in 2010.

But the verdict of Moody's will add to the pressure from opposition Members of Parliament (MPs) and many economists on him to change course. Moody's said it was concerned that he would miss previous targets to cut the deficit by 2015.