By STEPHEN CASTLE
BRUSSELS — Despite anger in Brussels over the timing of a warning of a
broad credit-rating downgrade days before a crucial European summit
meeting, German officials on Tuesday portrayed the threat by Standard
& Poor’s as a spur for leaders to make a deal to rescue the euro.
Heinz-Peter Bader/Reuters
In Vienna, Finance Minister Wolfgang Schäuble of
Germany called the S&P downgrade warning the "best encouragement" to
find a solution to the debt crisis.
Late Monday, S.&P. warned that the ratings of 15 euro zone
countries, including Germany and France, were vulnerable to a downgrade.
On Tuesday, the agency extended its threat of a possible downgrade to
include the top-notch, long-term credit rating on the European Union’s
main bailout fund, if any of its gilt-edged guarantors are downgraded.
Just before the latest move, the European commissioner responsible for
financial market regulation, Michel Barnier, complained that the rating
agency had acted without waiting to evaluate the results of the summit
meeting, set for Thursday and Friday.
Jean-Claude Juncker, who heads the group of euro zone finance ministers,
added during an interview on German radio, “I have to wonder that this
news reaches us out of the clear blue sky at the time of the European
summit — this can’t be a coincidence.”
On several occasions in the past rating agencies have made announcements
before meetings on the euro debt crisis. This time S.&P.’s
downgrade threat was effectively a warning to European leaders of the
consequences that would flow from failure to tale sufficiently
convincing action.
Few now dispute the central thrust of the argument advanced by the
rating agency that the economy of the euro zone is deteriorating so fast
that quick and far-reaching action is required to avert disaster.
“I actually see a positive effect, because now everyone must be aware of
how serious the situation is,” Norbert Barthle, the budget spokesman
for Chancellor Angela Merkel’s conservative party in Germany, told
Reuters.
The German finance minister, Wolfgang Schäuble, called it the “best encouragement” to find a solution.
“The truth is that markets in the whole world right now don’t trust the
euro area at all,” he said in Vienna, Bloomberg News reported.
S.&P.’s statement will prompt European leaders “to do what we’ve
promised, namely to take the necessary decisions step-by-step and to win
back the confidence of global investors.”
Market indexes in Europe were lower in late trading Tuesday, while the
yields on German and French bonds rose, a sign of added risk to holders
of the securities.
Speaking in Brussels, Mr. Barnier rejected the idea that the S.&P.
announcement was an act of revenge after the European Commission
announced last month plans to tighten regulation of rating agencies.
In fact, had the new rules been in place, they would not have covered
Monday’s statement. “Our proposals apply to ratings, rather than
warnings, though it might be worthwhile to discuss whether they should
apply to both,” said Chantal Hughes, a spokeswoman for Mr. Barnier.
The governments concerned had been informed in advance of the
announcement, said one European official who requested anonymity because
of the sensitivity of the issue.
Before the announcement from S.&P. the financial markets had reacted
positively to the outcome of Monday’s meeting between the French
President, Nicolas Sarkozy, and Mrs. Merkel, in which they bridged most
of their big differences over how to create a tighter fiscal framework —
or “fiscal compact” — for the 17-country euro zone.
The hope among many European officials is that an accord along these
lines will give the European Central Bank political cover to intervene
more aggressively to alleviate the crisis.
But key issues remain to be resolved in Brussels later this week. All 27
member states need to agree if the European Union’s governing treaty is
to be amended — the declared first option of the French and German
leaders.
If some countries outside the euro zone object, or demand significant
concessions in exchange for their acquiescence — as the British Prime
Minister David Cameron is under domestic pressure to do — then France
and Germany reserved the right to press for a euro zone only agreement.
Many details have yet to be filled in. They includes the precise role of
the European Court of Justice in policing new financial rules that will
aim to prevent countries running big debts and deficits. Mrs. Merkel
had wanted a key role for the court but has retreated in the face of
French objections.
The two leaders agreed on the early introduction of a permanent bailout
system for the euro next year and Mrs. Merkel has eased her insistence
that, under this arrangement, private creditors must be involved in any
future sovereign debt restructuring.
But again the detail is opaque and it remains unclear how a country like
France can make its contribution to the fund without jeopardizing its
triple-A credit rating.
