Wednesday

16th Jan 2019

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.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

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 bleeding untold billions to fraud

Over €6bn of EU taxpayers' money was stolen by criminals in recent years and over €130m is still being lost each year, EU auditors said.

News in Brief

  1. British PM scrapes through no confidence vote
  2. Spanish PM calls for EU gender equality strategy
  3. Farage says bigger Brexit majority if second referendum
  4. Macron starts 'grand debate' tour after yellow vests protests
  5. Barnier: up to London to take Brexit forward
  6. Stimulus still needed, ECB's Draghi says in final report
  7. May's Brexit deal defeated by 230 votes
  8. German economy hit by global economic turbulence

Stakeholders' Highlights

  1. International Partnership For Human RightsKyrgyz authorities have to immediately release human rights defender Azimjon Askarov
  2. Nordic Council of MinistersSeminar on disability and user involvement
  3. Nordic Council of MinistersInternational appetite for Nordic food policies
  4. Nordic Council of MinistersNew Nordic Innovation House in Hong Kong
  5. Nordic Council of MinistersNordic Region has chance to become world leader when it comes to start-ups
  6. Nordic Council of MinistersTheresa May: “We will not be turning our backs on the Nordic region”
  7. International Partnership for Human RightsOpen letter to Emmanuel Macron ahead of Uzbek president's visit
  8. International Partnership for Human RightsRaising key human rights concerns during visit of Turkmenistan's foreign minister
  9. Nordic Council of MinistersState of the Nordic Region presented in Brussels
  10. Nordic Council of MinistersThe vital bioeconomy. New issue of “Sustainable Growth the Nordic Way” out now
  11. Nordic Council of MinistersThe Nordic gender effect goes international
  12. Nordic Council of MinistersPaula Lehtomaki from Finland elected as the Council's first female Secretary General

Latest News

  1. MEPs allow Draghi's membership of secretive bank group
  2. EU parliament backs Morocco deal despite row
  3. Barnier open to 'future relations' talks if UK red lines shift
  4. German spies to monitor far-right AfD party
  5. On Morocco, will the EU ignore its own court?
  6. UK parliament rejects May's Brexit deal in historic defeat
  7. EU suggests majority vote on digital tax by 2025
  8. MEPs redouble appeal on sexual harassment

Join EUobserver

Support quality EU news

Join us