THE Standard and Poor’s ratings agency has threatened to bankrupt the major eurozone states by shredding their triple A status.
This would make it impossible for them to borrow the billions of currency that they require to function.
ne region’s ratings before this Friday’s eurozone summit because the risks of a deepening crisis have ‘risen markedly’.
‘Policy makers appear to have acted only in response to mounting market pressures,’ S&P said, declining to comment beyond the statement.
There was a mixed response to the ultimatum.
Some damned it as intolerable interference, while others said it was the only way to force through what had to be done.
German Finance Minister Wolfgang Schaeuble said the threat to downgrade eurozone countries is the ‘best possible incentive’ ahead of Friday’s summit’.
Schaeuble said that the summit must act to regain the confidence of investors.
‘The solution to the crisis must be . . . verifiable, credible and confidence-building,’ he said.
‘The truth is markets worldwide don’t trust the eurozone at all right now.’
But German Economy Minister Philipp Roesler said: ‘Germany will not let itself be influenced by the short-lived verdict of one rating agency.
‘We think nothing of such threats. We have no difficulties on the financial markets. We are and remain the anchor of stability in Europe.’
European Central Bank Governing Council member Ewald Nowotny of Austria said the S&P move ‘highlights the problem that rating agencies increasingly are assuming a political role.
‘There is no doubt that rating agencies have an economically important role to play, but the way in which this is happening at the moment is increasingly problematic as it creates pro-cyclical effects, that means effects that make the crises worse.’
The outlook change is ‘disastrous for Europe,’ Mark Grant, a managing director at Southwest Securities Inc. in Fort Lauderdale, Florida, said.
‘Every bank now in Europe is also going to be downgraded as the sovereigns are downgraded, many corporations in Europe will be downgraded, the euro is going to come under tremendous pressure worldwide,’ Grant said.
‘There’s just a whole lot of dominoes that are going to fall because of this report.’
Meanwhile, growth in the eurozone was stagnant for the second quarter in a row it was revealed yesterday, presaging a move back into recession.
In the three months to September, gross domestic product (GDP) grew by just 0.2% compared to the previous quarter.
• British Tories are already threatening to bring the coalition down if there is no UK referendum on the new treaty.
