Open

Coming up

Don't miss

Replay


LATEST SHOWS

MEDIAWATCH

Netanyahu deletes tweet featuring photo of James Foley

Read more

THE WORLD THIS WEEK

The World This Week - 22 August 2014 (part 2)

Read more

THE WORLD THIS WEEK

The World This Week - 22 August 2014

Read more

FRANCE IN FOCUS

FRANCE IN FOCUS

Read more

FOCUS

Lifting the veil over China's air pollution

Read more

ENCORE!

Tango Takeover in Paris

Read more

WEB NEWS

Calls for ISIS media blackout after execution of James Foley

Read more

IN THE PAPERS

'Steely resolve of reporters exploited by pared-down employers'

Read more

BUSINESS DAILY

US judge calls Argentina bond swap offer illegal

Read more

  • ‘European GPS’ satellites launched into wrong orbit

    Read more

  • Merkel in Kiev as aid convoy ‘returns to Russia’

    Read more

  • Suicide bomber targets Iraq intelligence HQ in deadly attack

    Read more

  • Video: Israel bombs kidnapping suspect’s home

    Read more

  • US brands journalist’s beheading a ‘terrorist attack’

    Read more

  • Ebola prompts Philippines to recall UN troops in Liberia

    Read more

  • Besieged by problems, Hollande faces unhappy return from summer holidays

    Read more

  • US sued over ‘deportation mill’ in New Mexico

    Read more

  • Colombian army and FARC rebels begin work on ceasefire

    Read more

  • US National Guard starts to pull out of embattled Ferguson

    Read more

  • PSG fall flat once more against Evian

    Read more

  • US job market yet to recover from recession, says Fed Chair

    Read more

  • August 22, 1914: The bloodiest day in French military history

    Read more

  • Central African Republic announces coalition cabinet

    Read more

  • French firebrand leftist to quit party presidency, but not politics

    Read more

  • Fear of Ebola sky-high among Air France workers

    Read more

  • US says Islamic State threat 'beyond anything we've seen'

    Read more

  • Interactive: Relive the Liberation of Paris in WWII

    Read more

Europe

Eurozone crisis deepens after rating downgrades

Text by News Wires

Latest update : 2012-01-14

The Eurozone faced further turmoil on Saturday after nine of its member states were hit with a credit rating downgrade, including France. Ratings agency Standard & Poor's criticised European leaders for not doing enough to avert the debt crisis.

REUTERS - Standard & Poor’s hit the euro zone with a downgrade of half the countries in the single currency area, including formerly AAA-rated France, and it questioned the strategy of its political leaders for dealing with their two-year old debt crisis.

Germany, the bloc’s largest economy, was spared.
 
In downgrading nine of the euro zones 17 members, S&P said policymakers had not done enough to address the crisis and were even overlooking a key cause of the problem: sharp differences in economic competitiveness among countries that use the euro.
European Commisioner 'surprised' by downgrade

The European commissioner in charge of the internal market, Michel Barnier, said Saturday he was "surprised" by the timing of Standard and Poor's ratings downgrades of several countries just as the eurozone is in the process of toughening budget rules.

"While all the governments and all the European institutions are working" to reinforce discipline in public finances and the governance of the monetary union, "I am surprised at the moment chosen by the Standard and Poor's agency, and fundamentally of its evaluation which does not take into account recent progress," said Barnier in a statement sent to AFP.

 
“As such, we believe that a reform process based on a pillar of fiscal austerity alone risks becoming self-defeating, as domestic demand falls in line with consumers’ rising concerns about job security and disposable incomes, eroding national tax revenues,” the agency said.
 
While S&P gave higher grades to the European Central Bank for sustaining market confidence through emergency lending to euro zone banks, it said political initiatives thus far “may be insufficient” to address the crisis.
 
The mass downgrade follows S&P’s decision last August to strip the United States of its top credit rating, a move it also chalked up, at least partly, to political stalemate—namely, lawmakers’ inability to agree on ways to cut the budget deficit.
 
European leaders, including Germany’s Angela Merkel, have urged countries to tighten their belts with higher taxes and deep spending cuts to rein in massive budget deficits. But that has heightened market concern about their ability to grow their way back to health, pushing borrowing costs even higher for heavily indebted governments.
 
“In our view, it is increasingly likely that refinancing costs for certain countries may remain elevated, that credit availability and economic growth may further decelerate and that pressure on financing conditions may persist,” S&P said.
 
European leaders are set to meet at a summit later this month to discuss how to boost growth and jobs.
 
At a summit on Dec. 9, EU leaders secured agreement on drafting a new treaty for deeper economic integration in the euro zone, but the chances for more decisive measures to stem the debt crisis remain uncertain.
 
France and Austria both saw their top AAA ratings cut one notch to AA-plus, while Malta, Slovakia and Slovenia also suffered one-notch downgrades.
 
S&P dropped the credit ratings of Italy, Portugal, Spain and Cyprus by two notches.
 
The agency reaffirmed the ratings on seven other euro zone countries, including Germany. But it said that of the 16 countries reviewed, all save Germany and Slovakia have negative outlooks, meaning more downgrades are possible in the next couple of years.
 
“Europe is going to continue to struggle and we’re going to see further downgrades and higher yields until European leaders feel that they have the political support to decide whether or not the euro zone is going to be a political union going forward or merely an economic union,” said BNY Mellon currency strategist Michael Woolfolk.
 
French Finance Minister Francois Baroin played down the impact of the move, saying it was “not a catastrophe”.
 
Friday’s decision may add to the debt problems as it is likely to increase euro zone borrowing costs across the board.
 
The move could trigger a series of downgrades of large European banks, companies and government entities. This could include the European Financial Stability Facility, or EFSF, the fund created to rescue troubled euro zone countries, and the European Union.
 
A downgrade of the EFSF could increase its borrowing costs, reducing its ability to protect the currency bloc’s weaker members.
 
In an interview with Reuters, John Chambers, chairman of S&P’s sovereign rating committee, said it would take further increased commitment from the remaining AAA-rated guarantors, including Germany, for the EFSF fund to retain its AAA status.
 
The main risks to Germany’s AAA ratings are a deterioration of its fiscal situation or problems in its financial sector, Chambers, told CNBC-TV on Friday.

 

Date created : 2012-01-14

  • EUROZONE

    Markets fall on rumours of S&P eurozone downgrade

    Read more

  • MARKETS

    Spain doubles target at first 2012 bond auction

    Read more

COMMENT(S)