DHAKA: Top rated Germany, Europe’s paymaster, faced the prospect Tuesday of a damaging downgrade as Moody’s warned that problems in Spain and Italy made the eurozone debt crisis even more dangerous.
Cutting Germany’s rating outlook to ‘Negative’ from ‘Stable’, meaning it could be downgraded, Moody’s said no country was immune from a crisis which has already forced Greece, Ireland and Portugal into massive bailouts.
Germany, and fellow triple-A rated countries the Netherlands and Luxembourg, faced risks from Greece leaving the eurozone and from the need to stump up cash for potential debt rescues for Spain and Italy, it said, reports daily Hurriyet.
‘The continued deterioration in Spain and Italy’s macroeconomic and funding environment has increased the risk that they will require some kind of external support,’ it added.
Germany, seen as absolutely crucial to resolving the crisis, immediately shot back, insisting that it was ‘itself in a solid economic and financial situation’ and that it remained the ‘eurozone’s anchor of stability’.
The German finance ministry said it had ‘taken note of Moody’s opinion’, arguing that the ratings agency had put the focus on short-term risks, while stability prospects in the long term are not mentioned.
‘The eurozone has initiated a series of measures which should lead to the durable stabilising of the zone,’ the ministry added.
Spain’s borrowing costs hit levels well above seven percent on Monday, prompting sharp falls in Europe’s main stock markets although they levelled off in early trading Tuesday.
The crisis in Spain will be thrashed out in a meeting on Tuesday evening between German Finance Minister Wolfgang Schaeuble will hold talks with Spanish Economy Minister Luis de Guindos in Berlin.
The German economy has up to now proved largely resilient to the crisis, although it is now showing signs of a slowdown, with the eurozone looking to Berlin to take the lead in resolving the impasse.
Jean-Claude Juncker, head of the eurozone finance ministers group, on Tuesday stated his ‘strong commitment’ to eurozone’s stability.
BDST: 1645 HRS, JUL 24, 2012
Edited by Robab Rosan, Cultural Affairs Editor
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