Moody's Investors Service downgraded 29 more debt issuers in Western Europe than it upgraded in the second quarter of this year, making it the worst period of deterioration in credit quality since the beginning of 2003.

The ratings agency downgraded 41 issuers in the second quarter, and upgraded just 12, as companies' credit quality suffered from the spectre of staglation, the twin effects of economic stagnation and rising inflation.