EU LEADERS are coming under fresh pressure to strike a comprehensive deal to calm the debt debacle after a warning that the crisis threatens the credit rating of virtually all members of the single currency.
As the EU authorities prepare difficult steps to calm the emergency at a summit this week in Brussels, the rating agency Standard & Poor’s has told Germany and other wealthy euro zone countries that they could lose their triple-A credit ratings as a result of the turmoil.
Any such action by S&P could cripple the European Financial Stability Facility rescue fund as it depends on the triple-A ratings of Europe’s most prosperous countries to borrow at preferential rates to fund the Irish and Portuguese bailouts.
Ireland was among 15 euro zone countries to be warned late last night that its rating was in question. In addition to Germany and Ireland, the other countries concerned are: Austria; Belgium; Finland; France; Luxembourg; the Netherlands; Estonia; Italy; Malta; Portugal; Slovakia; Slovenia and Spain.
S&P cited the increased risk of recession in the euro zone and the uncertainty over the political response to the crisis, saying “continuing disagreements among European policy makers” on how to tackle the immediate market confidence crisis were a factor in its decision. The moves came hours after Germany and France watered down their demand for private investors to bear losses in future bailouts as they pushed for a rapid revision of the Lisbon treaty to toughen the enforcement of Europe’s budget laws.
The change of approach by Angela Merkel and Nicolas Sarkozy sees them step away from key elements of the deal they struck at Deauville last year in which they set out to shape Europe’s response to the debt crisis.