Nine eurozone countries have had credit ratings cut
Nine eurozone countries have had their credit ratings cut in another massive blow to the single currency, it was confirmed last night.
European leaders had hoped the single currency area was starting to stabilise but France has lost its gold-plated AAA status in the Standard & Poor’s ratings.
Austria, Malta, Slovakia and Slovenia also slipped by one notch while Portugal, Cyprus, Italy and Spain were downgraded by two.
The downgrade is a serious blow to French President Nicolas Sarkozy who is fighting for re-election this spring.
Mr Sarkozy has staked his reputation on France keeping its triple-A credit rating and had even boasted that Britain’s credit rating was in a worse state.
Deputy Prime Minister Nick Clegg said the French downgrade underlined the “urgency” of solving the debt crisis in the eurozone. He called for a more “concerted effort” by all 27 EU members to boost growth and productivity.
EU leaders will meet on January 30 for the latest emergency summit aimed at saving the single currency from collapse.
Germany has retained the triple A rating and Chancellor Angela Merkel last night made a veiled swipe at Mr Sarkozy for avoiding budget cuts to win votes.
She said: “Every member of the eurozone must have a debt brake in its constitution, so leaders don’t use elections or other opportunities according to their mood to live beyond their means.”
World markets fell as news emerged that the downgrade was about to be announced.
At one point the FTSE 100 Index was down more than 1% though it rallied to 0.5% down. Frankfurt’s Dax fell 0.6%, and the Dow Jones in New York was down 0.8%. Reports of a breakdown in talks between Greece and its banks to restructure its debts fuelled fears of a default and drove markets lower.
UK Independence Party leader Nigel Farage said Standard & Poor’s announcement could mean “the beginning of the end” for the eurozone.
He said: “Now that France has been downgraded I expect the bond yields of countries like Italy and Spain to rise, leading to a need for a bailout and more trouble for the euro currency.
“The euro, the ultimate federalist fantasy, has become a nightmare for those caught in its embrace.
“This downgrade of France’s credit rating will make its debt more expensive and may prove to be the beginning of the end for eurozone as we know it.”
The leader of Britain’s Tory MEPs Martin Callanan said the downgrade, coupled with fresh difficulties for Greece, increased pressure on EU leaders to “stop fiddling with treaties and start tackling the immediate crisis”.
Twenty-six member states are trying to finalise a new “fiscal compact” to tighten controls on eurozone debt and deficit levels but Mr Callanan said: “If European leaders really want to save the euro, they need to listen to what the markets have already told them. It is time for some countries to leave the single currency.
"The longer we dither, the worse the crunch will be.” He said the negotiations on the new pact had done little to calm markets.
He added: “While European leaders have been gazing at their collective navel, market confidence has continued to decline. We take one step forward and five steps backwards in this crisis.”
And he warned: “We can’t afford to keep buying time with taxpayers’ money. Eurozone leaders must face up to the reality the eurozone disease will not begin to be cured until we remove the infected limb.
“The EU summit at the end of this month really is the last chance saloon for an injection of realism from EU leaders.
“If we see yet more discussion of treaties, bailout mechanisms and attacks on financial services then I fear we will soon pass the mark where we can salvage anything from the wreckage.”
A statement from Standard & Poor warned: “The outlook on the long-term ratings on Austria, Belgium, Cyprus, Estonia, Finland, France, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovenia, and Spain are negative, indicating there is at least a one-in-three chance that the rating will be lowered in 2012 or 2013.”
In an attack on EU leaders, it went on: “Today’s rating actions are primarily driven by our assessment that the policy initiatives that have been taken by European policymakers in recent weeks may be insufficient to fully address ongoing systemic stresses in the eurozone.”
Austria’s economy has been partly hit because it is a big exporter to struggling Italy, while its banks are facing losses on subsidiaries they own in troubled Hungary.
Nine eurozone countries have had their credit ratings cut in another massive blow to the single currency, it was confirmed last night.
European leaders had hoped the single currency area was starting to stabilise but France has lost its gold-plated AAA status in the Standard & Poor’s ratings.
Austria, Malta, Slovakia and Slovenia also slipped by one notch while Portugal, Cyprus, Italy and Spain were downgraded by two.
The downgrade is a serious blow to French President Nicolas Sarkozy who is fighting for re-election this spring.
Mr Sarkozy has staked his reputation on France keeping its triple-A credit rating and had even boasted that Britain’s credit rating was in a worse state.
Deputy Prime Minister Nick Clegg said the French downgrade underlined the “urgency” of solving the debt crisis in the eurozone. He called for a more “concerted effort” by all 27 EU members to boost growth and productivity.
EU leaders will meet on January 30 for the latest emergency summit aimed at saving the single currency from collapse.
Germany has retained the triple A rating and Chancellor Angela Merkel last night made a veiled swipe at Mr Sarkozy for avoiding budget cuts to win votes.
She said: “Every member of the eurozone must have a debt brake in its constitution, so leaders don’t use elections or other opportunities according to their mood to live beyond their means.”
World markets fell as news emerged that the downgrade was about to be announced.
At one point the FTSE 100 Index was down more than 1% though it rallied to 0.5% down. Frankfurt’s Dax fell 0.6%, and the Dow Jones in New York was down 0.8%. Reports of a breakdown in talks between Greece and its banks to restructure its debts fuelled fears of a default and drove markets lower.
UK Independence Party leader Nigel Farage said Standard & Poor’s announcement could mean “the beginning of the end” for the eurozone.
He said: “Now that France has been downgraded I expect the bond yields of countries like Italy and Spain to rise, leading to a need for a bailout and more trouble for the euro currency.
“The euro, the ultimate federalist fantasy, has become a nightmare for those caught in its embrace.
“This downgrade of France’s credit rating will make its debt more expensive and may prove to be the beginning of the end for eurozone as we know it.”
The leader of Britain’s Tory MEPs Martin Callanan said the downgrade, coupled with fresh difficulties for Greece, increased pressure on EU leaders to “stop fiddling with treaties and start tackling the immediate crisis”.
Twenty-six member states are trying to finalise a new “fiscal compact” to tighten controls on eurozone debt and deficit levels but Mr Callanan said: “If European leaders really want to save the euro, they need to listen to what the markets have already told them. It is time for some countries to leave the single currency.
"The longer we dither, the worse the crunch will be.” He said the negotiations on the new pact had done little to calm markets.
He added: “While European leaders have been gazing at their collective navel, market confidence has continued to decline. We take one step forward and five steps backwards in this crisis.”
And he warned: “We can’t afford to keep buying time with taxpayers’ money. Eurozone leaders must face up to the reality the eurozone disease will not begin to be cured until we remove the infected limb.
“The EU summit at the end of this month really is the last chance saloon for an injection of realism from EU leaders.
“If we see yet more discussion of treaties, bailout mechanisms and attacks on financial services then I fear we will soon pass the mark where we can salvage anything from the wreckage.”
A statement from Standard & Poor warned: “The outlook on the long-term ratings on Austria, Belgium, Cyprus, Estonia, Finland, France, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovenia, and Spain are negative, indicating there is at least a one-in-three chance that the rating will be lowered in 2012 or 2013.”
In an attack on EU leaders, it went on: “Today’s rating actions are primarily driven by our assessment that the policy initiatives that have been taken by European policymakers in recent weeks may be insufficient to fully address ongoing systemic stresses in the eurozone.”
Austria’s economy has been partly hit because it is a big exporter to struggling Italy, while its banks are facing losses on subsidiaries they own in troubled Hungary.
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