Germany's prized AAA rating under threat
GERMANY’S AAA credit rating was put under threat on Monday night after a day of turmoil across the global markets.
Moody’s warned the outlook for the ratings of Germany, Luxembourg and the Netherlands is negative because the threat of a Greek exit from the eurozone and the need for greater financial support for struggling eurozone countries from the strongest members of the bloc.
In a statement, issued after the close of the US markets, it added: “The level of uncertainty about the outlook for the area and the potential impact of plausible scenarios on member states, are no longer consistent with stable outlooks.”
After the move, Germany's finance minister said his country would continue to play the role of the "eurozone's anchor of stability".
"Germany will do all it can with its partners to overcome the European debt crisis as quickly as possible," Wolfgang Schaeuble said.
Earlier in the day, global markets fell sharply. The FTSE 100 closed down 2.1pc at 5,533.87 as fears about an escalation of the debt crisis engulfed markets. Spain’s borrowing costs soared to fresh euro-era highs and the imminent arrival in Athens of European officials put a spotlight back on Greece’s ability to meet the terms of its bail-out package.
The DAX in Germany fell 3.2pc to 6,419.33, the French CAC 40 closed down 2.9pc at 3,101.53. In Spain, the IBEX 35 fell 1.1pc to 6,177.40. While in Greece, the ASE slumped 7.1pc to 586.04. The Dow finished down 0.8pc at 12,721.46 in New York.
As panic mounted, Spain banned the short-selling of shares to try to limit market volatility. Spain’s market regulator said the practice – which sees traders betting on share prices – would be banned for three months in an attempt to restore order. Italy also banned short-selling of financial shares for a week.
The euro fell to a two-year low against the dollar to $1.2067 and a near 12-year low against the yen as risk appetite disappeared.