Main focus of Wednesday, July 25, 2012

Moody's takes strong euro countries to task

Moody's allowed Germany, the Netherlands and Luxembourg, as well as the EFSF bailout fund, to keep their top AAA credit rating - for now. (© AP/dapd)

The rating agency Moody's sees the top credit ratings of several EU countries and the EFSF rescue funds in danger. On Monday it adjusted its outlook for the credit ratings of Germany, the Netherlands and Luxembourg from "stable" to "negative" and on Tuesday it did the same with the EFSF. Some commentators see the threat as a warning that should be taken seriously, while others say the agency is pandering to the US.

Moody's analysis is wrong

The negative outlook for Germany, the Netherlands and Luxembourg is the product of a faulty analysis by the rating agency, writes Georges Ugeux in his blog Démystifier la finance with the daily Le Monde: "The analysis is completely wrong. Despite the claims of the moody rating agency, a Greek exit … would not affect European banks - for a very simple reason: the private sector held [Greek] risk bonds amounting to 100 billion euros and accepted an exchange that reduced the debt by 80 percent. This leaves the private finance sector with an outstanding sum of 20 billion euros, which will very probably be repaid. Spread among 400 creditors that leaves each with an average of 50 million. There are certainly a few European banks that bought into Greek banks, but not ones in Germany and the Netherlands, and certainly not ones in Luxembourg. Two of them, however, are in France." (23/07/2012)

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More from the press review on the subject » Fiscal Policy, » Financial Markets, » Banks, » Germany, » Greece, » Netherlands
All available articles from » Georges Ugeux
Who's saying what » Ways out of the debt crisis

A painful message for Germany

What Moody's is really saying is that Germany will be footing the bill for the Eurozone problems, no matter what it does, explains the liberal-conservative Neue Zürcher Zeitung: "If the euro partners don't help countries like Greece, Spain and Italy it will be expensive for Germany, because a new wave of financial crises could break over Europe. If they do help, it will still be costly, because Germany and the other Northern European countries will have to shoulder the lion's share of the burden. The very Anglo-Saxon-sounding message from Moody's that the mess stems from the failure of the politicians to act quickly and that everything would be ok if everyone would just throw some real cash at the problem, is misguided. If Germany were to assume wide-scale liability for other EU states, then fears really would escalate about over-stretching German state finances. The trust in bond markets could dissipate at a worrying speed. None of this looks good for Germany. Whatever it does the German state and its citizens are going to have to pay to correct the errors and negligences committed in the Eurozone. This is the painful message from Moody's." (25/07/2012)

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More from the press review on the subject » EU Policy, » Fiscal Policy, » Economy, » Germany, » Europe
All available articles from » Matthias Benz
Who's saying what » The row over debt mutualisation

Rating agency issues prognoses to oblige US

Germany needn't worry too much about Moody's warning because it is strong enough to handle Greece and Spain going bankrupt, the liberal business paper Handelsblatt says, arguing that the rating agency's assessments are influenced by politics: "We can take it for granted that the agencies don't issue any ratings that would meet with Washington's disapproval. If you want to interpret the rating warning to Germany politically, what would the message be? It weakens the position of the Bundesbank, with which the US government is increasingly unhappy. The Frankfurt-based bank is insisting that fresh cash from the central banks should contribute as little as possible and the governments as much as possible to resolving the crisis. At the same time each country should remain responsible for its own finances for as long as Europe is not a federation. The result is that the risk of bankruptcy for crisis-hit countries and the risk of default denounced by Moody's remain high for lenders. And the message from Moody's is that this strategy is also threatening Germany's rating. This weakens one argument against debt mutualisation through euro bonds. Because here in Germany the view is that they would drag Germany's creditworthiness down to the European average."  (25/07/2012)

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More from the press review on the subject » EU Policy, » Fiscal Policy, » Economy, » Germany, » U.S.
All available articles from » Norbert Häring

Politicians must listen to Moody's

The warning from rating agency Moody's that Germany, Luxembourg and the Netherlands could face a credit status downgrade must be taken seriously, the liberal daily NRC Handelsblad argues: "The Netherlands is lagging behind in economic growth, also in comparison with the European Union average. But above all it is battling excessive private sector debt, and Moody's is not the first to warn about this. The Dutch politicians are playing deaf for fear of being forced to introduce unpopular measures. The problem of mortgage interest payments being fully tax deductible and mortgages being financed free of transfer fees is being tackled on a minor scale only. So it's too little, too late when it comes to combating the major cause of private debt. The message the politicians must convey now in the election campaign [ahead of the parliamentary elections on September 12] is that the crisis affects everyone, citizens and state alike. Otherwise Moody's will teach us this more harshly." (25/07/2012)

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More from the press review on the subject » Fiscal Policy, » Economy, » Germany, » Luxembourg, » Netherlands
Who's saying what » Ways out of the debt crisis

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