Germany 'is still safe haven' for eurozone despite credit rating cut
CHANCELLOR Angela Merkel's government says Germany will remain Europe's haven during the financial crisis, pushing back against Moody's Investors Service's decision to lower the outlook on the country's top credit rating.
The risks in the eurozone are "not new" and Germany remains "in a very sound economic and financial situation," the Finance Ministry said. In counterpoint to Moody's, it cited the verdict of financial markets that have rewarded Germany with record low borrowing costs.
"Germany will, through solid economic and financial policy, defend its 'safe haven' status and continue to responsibly maintain its anchor role in the eurozone," the ministry said in an emailed statement. "Together with its partners, it will do everything to overcome the sovereign debt crisis as rapidly as possible."
Eurozone bonds fell after Moody's lowered the outlook to negative for the AAA credit ratings of Germany, the Netherlands and Luxembourg. Moody's cited "rising uncertainty" over Europe's debt crisis. It left Finland as the only country in the 17-nation euro region with a stable outlook for its top ranking.
German 10-year government bond yields rose 6 basis points to 1.23pc, while equivalent Dutch yields climbed 8bps to 1.7pc.
Germany, as Europe's biggest economy and the dominant state in almost three years of crisis fighting, is under pressure to do more to stem the turmoil as borrowing costs rise in Italy and Spain and Greece strives to identify yet more budget cuts to satisfy the terms of its international bailout.
Moody's said risks Greece may leave the euro and an "increasing likelihood" of collective support for countries such as Spain and Italy were among the reasons for its decision.
"Given the greater ability to absorb the costs associated with this support, this burden will likely fall most heavily on more highly rated member states if the euro area is to be preserved in its current form," Moody's said.
Luxembourg's Jean-Claude Juncker, who leads the group of eurozone finance ministers, said that Germany, the Netherlands and Luxembourg continued to enjoy "sound fundamentals." He reiterated a "strong commitment to ensure the stability of the euro area as a whole".
The Netherlands never comments on rating companies, a spokesman of the Dutch Finance Ministry said.
"If even Germany loses the highest rating, then the second-highest rating becomes the best one," Norbert Barthle, budget spokesman in parliament for Mrs Merkel's Christian Democratic bloc, said in an interview.
All the same, "it can't be ruled out" that the downgrade will damp its appetite to approve aid for cash-strapped euro members, he said. (Bloomberg)