Friday

15th Dec 2017

Eurozone crisis worsens as Germany warned on top rating

  • Spanish airport: The country's borrowing costs have soared to record highs (Photo: Luc Mercelis)

The euro-crisis is accelerating as Spanish borrowing costs continue rising and Germany, Netherlands and Luxembourg on Monday (23 July) were warned they may lose their triple A rating due to 'rising uncertainty.'

Moody's, one of the big three credit ratings agencies, said risks that Greece may quit the eurozone and an "increased likelihood" that Spain and Italy would need more financial assistance weighs down on the three top-rated countries, as Germany is the main contributor to the bailout pot.

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.

Moody's kept a triple A rating for France and Austria but warned that this may change by the end of September. Both countries were downgraded earlier this year by Standard&Poor's, another major agency.

Markets fell across the world on Monday and investors dumped European assets, except for German government bonds, which are still considered a safe haven at record low interest rates of little over one percent. Spanish borrowing costs, however, rose above 7.5 percent - both for 10-year as well as 5-year bonds - a level which is considered bailout territory.

"By means of its solid economic and financial policy, Germany will retain its 'safe haven' status and continue to play its role as the anchor in the euro zone responsibly," the German finance ministry said in a statement.

Despite the downgrade warning, "Germany continues to find itself in a very solid economic and financial situation," it added.

The only triple-A rated country not to face a downgrade in the following months is Finland, which has demanded collateral on bailouts in Spain and Greece, runs a fiscally conservative budget and has limited trade links with the rest of the eurozone.

In a bid to stem the markets' descent, Italy and Spain on Monday reinstated a ban on so-called short selling - bets on falling stocks.

The government in Madrid - despite a freshly agreed eurozone bailout of up to €100 billion - faces further funding problems as one of its regions, Valencia, officially asked for a bailout to pay off its debt. El Pais newspaper reports five more regions may soon do the same, as they have no means of paying back their €15 billion of debt redemption due later this year.

Spanish economy minister Luis de Guindos is expected in Berlin on Tuesday for talks with his German counterpart, Wolfgang Schauble. De Guindos has so far insisted that his country will not seek a full-blown bailout. But its unsustainable borrowing costs and the bankruptcy facing its regions make investors believe the opposite.

"The rise in the 10-year yield well beyond 7 percent carries a very distinct reminder of events in Greece in April 2010, Ireland in October 2010 and Portugal in February 2011," the Bank of New York Mellon said in a note to investors. "In each case, a decisive move beyond 7 percent signalled the start of a collapse in investor confidence that, in each case, led to a bailout within weeks," it added.

The only way to avoid that would be if the European Central Bank intervened - as it did last year - in buying up Spanish bonds. Spanish officials in recent weeks have called on the ECB to step in, but so far this has not happened.

According to data published on its website, the ECB has not bought any sovereign bonds since February. The governing council of the ECB is meeting next week in Frankfurt when a decision on bond purchases could be taken.

Spanish bailout deal to be sealed amid protests

Eurozone finance ministers on Friday are set to iron out the final details of bailout of up to €100bn for the Spanish banking sector, just as tens of thousands Spaniards took to the streets in protest against fresh spending cuts.

Analysis

EU mulls post-Brexit balance of euro and non-eurozone states

Brexit will dramatically change the balance between EU members states that have the euro and those that don't. The thinking on the future of the eurozone is done at EU-27 level - but opposing camps will have to be reconciled.

Facebook to shift ad revenue away from Ireland

Public pressure about low corporate taxes appear to have pressured Facebook to launch plans to stop routing international ad sales through its Dublin-based headquarters in Ireland.

News in Brief

  1. Juncker: May made 'big efforts' on Brexit
  2. Merkel took 'tough' line on Russia at EU summit
  3. EU leaders added line supporting 'two-state' solution
  4. EU leaders agree to 20 European Universities by 2024
  5. Belgian courts end legal proceedings against Puigdemont
  6. French central bank lifts 2017 growth forecast
  7. EU leaders set to move Brexit talks on to next stage
  8. EU leaders confirm support for two-state solution

Stakeholders' Highlights

  1. Dialogue PlatformThe Gülen Community: Who to Believe - Politicians or Actions?" by Thomas Michel
  2. Plastics Recyclers Europe65% plastics recycling rate attainable by 2025 new study shows
  3. European Heart NetworkCommissioner Andriukaitis' Address to EHN on the Occasion of Its 25th Anniversary
  4. ACCACFOs Risk Losing Relevance If They Do Not Embrace Technology
  5. UNICEFMake the Digital World Safer for Children & Increase Access for the Most Disadvantaged
  6. European Jewish CongressWelcomes Recognition of Jerusalem as the Capital of Israel and Calls on EU States to Follow Suit
  7. Mission of China to the EUChina and EU Boost Innovation Cooperation Under Horizon 2020
  8. European Gaming & Betting AssociationJuncker’s "Political" Commission Leaves Gambling Reforms to the Court
  9. AJC Transatlantic InstituteAJC Applauds U.S. Recognition of Jerusalem as Israel’s Capital City
  10. EU2017EEEU Telecom Ministers Reached an Agreement on the 5G Roadmap
  11. European Friends of ArmeniaEU-Armenia Relations in the CEPA Era: What's Next?
  12. Mission of China to the EU16+1 Cooperation Injects New Vigour Into China-EU Ties

Latest News

  1. Dutchman to lead powerful euro working group
  2. EU mulls post-Brexit balance of euro and non-eurozone states
  3. EU asylum debate reopens old wounds
  4. Estonia completes two out of three priority digital bills
  5. EU countries are not 'tax havens', parliament says
  6. Tech firms' delays mean EU needs rules for online terror
  7. Slovak PM: Human rights are not a travel pass to EU
  8. British PM limps to EU capital after Brexit defeat