GERMANY’S FINANCE MINISTER Wolfgang Schauble has welcomed the threat by Standard & Poor’s to downgrade its rating for every single eurozone country – saying it provides an incentive for EU heads of government to resolve the debt crisis.
Last night the ratings agency said it was putting 16 eurozone member states – with Greece the only exception – on ‘creditwatch negative’, meaning that their credit ratings may be downgraded within 90 days.
In a statement, S&P said it was concerned about the failure of European Union leaders to agree on common measures to tackle the growing crisis, and the rising interest rates being charged for eurozone members to borrow money.
The BBC quotes Germany’s minister Schauble, however, as welcoming the move – even though it could result in Germany losing its coveted AAA rating and throw the entire eurozone into new turmoil.
Schauble said the news was the “best possible incentive” for European heads of government to agree on new measures to end the crisis, saying any solution must be “verifiable, credible and confidence-building”.
Germany, along with France, has been seeking the negotiation of an updated EU treaty to create a stronger common fiscal government – a move Ireland says will take too long to take effect.
The UK’s business secretary Vince Cable has also remained optimistic about the future of the eurozone, telling the BBC that he was “pretty confident” this week’s summit of leaders could end the crisis.
The head of the eurozone, Luxembourg prime minister Jean-Claude Juncker, said the S&P moves were “completely over the top” – telling German radio that the moves were “a crushing blow” ahead of the crucial weekend summit.
This afternoon Standard & Poor’s has also confirmed that it has put Europe’s bailout fund, the European Financial Stability Fund, on a similar negative watch – potentially increasing the interest rate that Ireland pays to borrow from it.
The EFSF, which funds €22.5 billion of Ireland’s EU-IMF programme, funds some of its lending through issuing bonds – meaning that Ireland’s loans from the EFSF may, in turn, become more expensive.