A leading credit ratings agency has warned Germany that there is a very real danger that the country will be stripped of its coveted triple-A ranking because of the heightened risk in the eurozone.
Moody’s has said that the spiralling financial crisis in the EU is putting the more stable countries in jeopardy and placed Germany, the Netherlands and Luxembourg on red alert.
Markets have been shaken in the last week by the growing unease in Spain and the likelihood that the country will be forced to ask for a full bail-out deal from the EU. As one of the largest economies in the single currency, the financial stress this could cause would be far greater than any seen to date.
However, Moody’s cited the re-emerging possibility of Greece leaving the euro as one of the primary concerns over the outlook. The IMF has told the EU it will not provide any more cash for Greece. Moody’s warned that if Greece defaults and leaves the eurozone, a ‘chain of financial sector shocks’ could be triggered, which could only be contained ‘at a very high cost.’
The ratings agency changed the outlook for Germany, the Netherlands and Luxembourg to ‘negative’ and also warned that these countries could be forced to hand over more money to support struggling nations in the bloc.
Spain and Italy are teetering on the brink of collapse, a battle that many fear Spain has now lost. Moody’s said that the wealthier nations in the euro could end up having to finance those which are unable to manage their deficit, in order to prevent the currency from imploding.
France and Austria already had their outlook lowered to ‘negative’ in February over euro fears and Moody’s plan to review the whole bloc in more detail again at the end of September.