European leaders sought to limit damage from a ratings agencys downgrade of nine countries on Friday,or even turn the news to their advantage,saying that it showed the need to impose more austerity or else do more to stimulate growth.
Germanys chancellor,Angela Merkel,said Saturday that the downgrade by Standard & Poors meant the euro area must speed up measures to create a more centralised currency union.
We are now challenged to implement the fiscal pact quickly, Merkel said in a statement Saturday,a day after S&P downgraded France,Austria and seven other countries but not Germany. She added that leaders should not water down the agreement and instead quickly pass other measures they have agreed to,like limits on debt.
In Italy,Prime Minister Mario Monti used the downgrades to bolster his argument that austerity alone would not solve the crisis. Europe needs to support national efforts in favour of growth and employment, Monti told the newspaper Il Sole 24 Ore,according to Bloomberg News.
On Saturday,S&P defended its debt downgrade decision. They have not achieved a solution that is sufficient in size or scope, the S&P analyst Moritz Kraemer told reporters in a conference call,according to The Associated Press.
The downgrades did not come as a surprise and were somewhat less severe than expected. In recent weeks,there have been a few hopeful signs in Europe,including economic indicators that were better than expected,successful bond sales by countries like Italy,and a more forceful response from the European Central Bank.
This may be why some of S&Ps actions have not been as dramatic as hinted at in early December, Laurent Fransolet,an analyst at Barclays Capital in London,wrote in a note to clients. S&P praised the European Central Bank,which has flooded banks with cheap loans to prevent a credit squeeze. We believe that euro zone monetary authorities have been instrumental in averting a collapse of market confidence, the agency said Friday.
Spared a cut were Belgium,Estonia,Finland,Germany,Ireland,Luxembourg and the Netherlands. They were among euro zone countries placed on credit watch with negative implications by S&P in December.
Still,the downgrades were hardly good news,especially since moves by one ratings agency have often been followed by others. The S&P action adds to the pressure on European leaders,and strengthens Merkel as she pushes her peers to increase austerity measures.
Germany comes out as a clear winner and will have its position at the negotiating table strengthened even further, Royal Bank of Scotland analysts said in a note.
Merkel said the downgrades showed that euro zone countries had a lot of work to do to restore investor trust. She also said that Europe should get its permanent rescue fund,known as the European Stability Mechanism,in operation sooner.
France can overcome crisis with reforms: Sarkozy
Amboise,France: French president Nicolas Sarkozy said on Sunday that France could overcome its debt crisis as long as it was prepared to pull together to adopt economic reforms,two days after the country lost its prized triple-A credit rating. Sarkozy said he would announce reforms at the end of the month and that he intends to implement them rapidly following talks with union leaders and employers this coming week.
I will tell them (the French people) the important decisions that we need to take without losing any time, he said in a speech to mark the 100th anniversary of the birth of Michel Debre,father of the constitution of Frances Fifth Republic.