Wednesday

24th Jan 2018

US agency issues eurozone ultimatum

  • Police cordon off the New York Stock Exchange after protesters 'occupied' parts of Wall Street in recent weeks (Photo: Dan Nguyen @ New York City)

US ratings agency Standard & Poor's (S&P) has warned it might lower the grade of all six triple-A eurozone countries if the upcoming EU summit does not deliver.

The Wall-Street-based firm said on Monday (5 December) that a bad summit would hit the ratings of 15 eurozone economies, excluding Cyprus and Greece which already have rock-bottom levels. Five of the top-rated countries - Austria, Finland, Germany, Luxembourg and the Netherlands - might be cut by one notch, while France might go down by two.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

It lambasted the EU's handling of the crisis so far as "slow and reluctant ... defensive and piecemeal."

It noted the summit must deliver "a greater pooling of fiscal resources and obligations as well as enhanced mutual budgetary oversight" in order to give the European Central Bank the confidence to buy more weak bonds.

It added that leaders must put forward growth ideas to stave off recession. "A reform process based on a pillar of fiscal austerity alone risks becoming self-defeating ... eroding the revenue side of national budgets," it said.

The S&P bombshell came shortly after France and Germany agreed to change the EU Treaty to enforce fiscal discipline.

Berlin and Paris reacted to S&P with a communique saying they "reaffirm that the proposals they made jointly today will reinforce the governance of the euro area in order to foster stability, competitiveness and growth."

The ratings warning caused Asian markets to fall after an earlier rally, amid fears that if triple-A countries go down, it would make it harder for the EU's bail-out fund, the EFSF, to borrow money, creating a negative spiral.

"The market is unstable and has been moving up and down like a seesaw. Investors buy stocks on good news after a plunge and are selling unless the news moves in the right direction," Naoteru Teraoka from the Tokyo-based Chuo Mitsui Asset Management told Bloomberg. "It is time for Germany and France to act," Phillip Swagel, an economics professor at the University of Maryland, said.

Other analysts suggested S&P's shock statement is designed to boost its own reputation after a difficult few months, however.

In August it cut the United States' triple-A rating on the basis of an alleged $2 trillion miscalculation, triggering subpoenas on insider trading. In November, it announced it had cut France's rating, then said it made a mistake. It also 'upgraded' Brazil to a rating which the country already had and cut a type of Ukrainian bond which does not exist.

"It does seem as though they are being particularly aggressive in terms of their ratings changes," Kathy Jones from the US-based firm Charles Schwab told the Wall Street Journal.

France launches inquiry after accidental downgrade

France has reacted with anger after a major ratings agency accidently suggested it had downgraded its credit rating status, but a prominent French economist believes the country is fighting the inevitable.

Ratings agency raises alarm on core EU economy

In a sign that the eurozone's ongoing debt crisis could infect its second biggest economy, US credit agency Moody's has indicated it might lower France’s triple-A rating.

Germany no longer immune to crisis

Germany had significant trouble offloading its bonds on Thursday in a sign that the eurozone crisis has spread to the very heart of Europe.

EU states loosen grip on tax havens

Finance ministers removed eight entities from the tax havens blacklist, while ruling out more transparency or sanctions - prompting criticism from tax-campaigning NGOs such as Oxfam.

Greece and creditors prepare bailout exit

Greece's creditors agreed to unblock €6.7 billion of new aid by April and to open debt-relief talks, ahead of the end of the programme in August.

News in Brief

  1. Japan-EU trade deal to start life by 2019
  2. Auditors criticise EU economic governance implementation
  3. Dutch environment group appeals air quality ruling
  4. Commission opens case into Polish railways state aid
  5. EU remove eight places from tax havens blacklist
  6. UK to keep forces in Germany over Russia fears
  7. Finnish presidential vote could go to second round
  8. Report: EU might pay Brexit residency fees for EU citizens

Stakeholders' Highlights

  1. European Free AlllianceNo Justice From the Spanish Supreme Court Ruling
  2. Nordic Council of MinistersNordic Solutions for Sustainable Cities: New Grants Awarded for Branding Projects
  3. Mission of China to the EUTrade Between China, Belt and Road Countries up 15%
  4. Nordic Council of MinistersOresund Inspires Other EU Border Regions to Work Together to Generate Growth
  5. Mission of China to the EUTrade Between China, Belt and Road Countries up 15%
  6. AJC Transatlantic InstituteAJC Calls on EU to Sanction Iran’s Revolutionary Guards, Expel Ambassadors
  7. Dialogue PlatformRoundtable on "Political Islam, Civil Islam and The West" 31 January
  8. ILGA EuropeFreedom of Movement and Same-Sex Couples in Romania – Case Update!
  9. EU2017EEEstonia Completes First EU Presidency, Introduced New Topics to the Agenda
  10. Bio-Based IndustriesLeading the Transition Towards a Post-Petroleum Society
  11. ACCAWelcomes the Start of the New Bulgarian Presidency
  12. Mission of China to the EUPremier Li and President Tusk Stress Importance of Ties at ASEM Summit

Latest News

  1. Berlusconi in Brussels on pre-election charm offensive
  2. ECJ should rule against Austrian online censorship lawsuit
  3. EU states loosen grip on tax havens
  4. Facebook promises privacy reboot ahead of new EU rules
  5. Europe is lacking tech leadership
  6. Spitzenkandidat system here to stay, MEPs warn capitals
  7. MEPs to keep 27 UK seats after Brexit
  8. Norway defends new Arctic oil drilling