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Merkel: Europe faces 'long road' to restore confidence

The Local · 14 Jan 2012, 14:04

Published: 14 Jan 2012 08:51 GMT+01:00
Updated: 14 Jan 2012 14:04 GMT+01:00

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"The decision confirms my conviction that we in Europe still have a long road ahead of us until investor confidence is again restored," she told reporters in the northern German city of Kiel.

"But it's also apparent that we have pursued resolutely this road of a stable currency, solid finances and sustainable growth," she said.

Merkel also stressed that Standard and Poor's, which Friday decided to cut

the ratings of nine eurozone nations including top-rated Austria and France

but not Germany, was just one of three ratings agencies.

She said they had "taken note" of the decision. "It did not totally

surprise us after discussions of recent weeks," she said.

Earlier on Saturday Finance Minister Wolfgang Schäuble sought to play down the ratings downgrade of France and Austria, insisting eurozone nations were on the "right track" and warning against overestimating its impact.

The eurozone economy was plunged back into crisis on Friday as France and Austria were stripped of their triple-A credit ratings and talks to agree a Greek debt writedown stalled.

But, Schäuble told television station RTL: "In recent months, we have increasingly come to an understanding worldwide that we should not overestimate the ratings agencies in their assessments."

“That there is great uncertainty in the euro countries is not new and of course affects us all," said the minister, speaking on the sidelines of a local election event in northern Germany.

Later, in the northern German city of Kiel, he said France was "on the right track" despite the downgrade, adding that members of the 17-country eurozone were very closely connected.

“Therefore we are not indifferent to this but together we are on the right track.

"We all have to stick to the rules together and strengthen competitiveness

and this we have to do all together," he added.

His ministry said later in a statement that it would work with its eurozone partners to restore the faith of the markets after the downgrades.

By "anchoring concrete fiscal rules in a binding agreement, we will stabilize the public finances of the eurozone's members, helping to restore and maintain market confidence in a sustainable manner," it said.

The ministry said the eurozone was equipped to take the steps necessary to slash public debt and win back investors.

"Our determination to strengthen Germany's public finances and to work towards the resolution of the sovereign debt crisis in the eurozone is beyond doubt," it said. "The same holds for our partners in the region."

It said that efforts in the last few weeks toward a pact for greater fiscal integration and budget surveillance, which member states hope to have signedby March, had already begun to bear fruit.

"Recent developments have shown that the markets are honouring these

Story continues below…

efforts," it said.

S&P also downgraded Italy by two notches to BBB+, negative outlook, with Spain cut two notches to A, negative outlook, as part of a major overhaul of ratings on 16 of the 17 eurozone nations, with Greece excluded.

It had warned last month that the credit ratings of 15 of the eurozone's 17 member states were at risk of a downgrade due to the ongoing debt crisis.

France was at that time warned it could be hit with a two-notch downgrade.

AFP/The Local/smd

The Local (news@thelocal.de)

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Your comments about this article

12:42 January 14, 2012 by pepsionice
My humble thoughts. First, it will drive the Euro up two to three cents over the next week. Second, it doesn't change much on the German or European strategy. Third, and perhaps something no one wants to think about....this may not be the last downgrade, and if there were another downgrade this year.....that might say something more serious. The positive news is that Germany is still a hundred times more better off than Greece, or California.
13:02 January 14, 2012 by raben
Germany is on the hook for the rest of the Euro zone now as well, and the Euro zone is looking much worse then USA:


Greece, Italy's and Spains debt are also Germany debt, this means in a year or two, Germany will also as the last lender, have their rating lowered because of all the risk Germany has taken on bailing out the other Euro countries.
13:50 January 14, 2012 by iseedaftpeople
what I don't get is how and why rating agencies can and should be allowed to have such power. They are private entities, they have to answer to nobody, their decisions are pretty much "black box", meaning how they arrive at a conclusion that a country is in trouble largely remains their own secret, and yet, their word goes, unquestioningly. And it has enough weight to not only throw stock markets into upheaval everytime a country gets downgraded, but it also wreaks havoc on that country's inner political landscape.

We should start seeing those rating agencies for what they really are -- they are front lines in an American financial and trade war against the rest of the world. Remember, these are the same rating agencies who issued AAA ratings wholesale for every junk bond and structured debt obligation that came down the conveyor belt, and who were a key culprit in the implosion of the worldwide financial system in 2008. Do we really want them to continue wielding such power over the global economy?
14:02 January 14, 2012 by raben
The downgrade also makes it more expensive for the European Financial Stability Fund to raise cash because France is the fund¦#39;s No. 2 backer behind Germany. This will inevitably lead to Germany needing to fund a bigger portion of the EFSF.

Only Germany, the Netherlands, Finland and Luxembourg retain triple-A ratings among the euro zone¦#39;s 17 member countries.
02:40 January 15, 2012 by derExDeutsche

Great Comment! You put into words how I¦#39;ve felt about a number of issues.


Girls keep telling me I¦#39;m ugly. And even more so now that I¦#39;ve grown out my thin mustache. But I question their authority. Who are they to say? I mean really. Where do they mkae such decisions? In a 'Black Box' ? Who gave them the power?

And look at the guys those girls are attracted to ! Their opinion should be banned and they should be told who to find attractive according to the opinion of ugly men.
02:44 January 15, 2012 by mkvgtired
iseedaftpeople, no one gives them any power. No one has to utilize their ratings either. The fact is large institutional investors have their own analysts and will continue to buy the downgraded bonds if the nations were unfairly targeted.

Take for instance US Treasuries trading at record low yields after they were downgraded to AA+. Look at France's exposure to toxic sovereign debt. I think the US deserved a downgrade for its childish handling of its debt ceiling and high debt level. I also think the nations that were downgraded Friday deserved it.

Also, Fitch is owned by a company in Paris and dual headquartered in London and NYC.
06:04 January 15, 2012 by hanskarl
@mkvgtired: correction, "for Obama's and US Democrats childish handling of its debt ceiling"
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