News / Europe

Germany's Credit Warning Underscores Eurozone Problems

A trader makes a phone call at his desk at the Frankfurt stock exchange, July 24, 2012.
A trader makes a phone call at his desk at the Frankfurt stock exchange, July 24, 2012.
Lisa Bryant
PARIS — Stock markets and the euro currency dipped Tuesday after the international financial-rating agency Moody's lowered its credit outlook for Europe's strongest economy, Germany.  New jitters are also surfacing over two shakier European economies, Spain and Greece.

By lowering Germany's credit outlook from stable to negative - along with those of two other top-rated countries, Luxembourg and The Netherlands - Moody's is signaling that the eurozone's crisis is affecting even its strongest economies.

The move is the first step to a possible downgrade of Germany's sterling AAA credit rating.  Europe's second-largest economy, France, lost its AAA rating earlier this year.  So did Austria.

Explaining its warning, Moody's said Germany was vulnerable to a possible Greek exit from the eurozone and the need to increase financial support to other ailing countries like Spain and Italy.  

Analyst Benedicta Marzinotto, of Brussels-based think-tank Bruegel, says it also reflects larger fears.

"I think the decision to reduce the rating on Germany is a sign that the rating agencies are considering the possibility of a eurozone breakup which would have consequences also for Germany," Marzinotto said.

Another analyst, Stewart Fleming of London-based Chatham House, said he was surprised at Moody's move.

"The German economy is fundamentally very, very strong," he said.  "Far stronger than the United States economy, the British economy, the Japanese economy.  So I certainly do not see this as an indication that the crisis is about to spread to Germany.  It is not."

It appears a June European Union summit aimed to ease market fears about the eurozone has had limited impact.  Borrowing costs are soaring for Spain, despite an EU agreement to bail out Spanish banks.

And Greece is having a hard time paying back its debt and enacting its austerity promises.  Creditors are in Athens now to assess its progress.  But with the Greek economy shrinking faster than expected, expectations are again mounting that that the country may exit the eurozone.

Fleming believes a Greek exit would be disastrous.

"Leaving the eurozone in the middle of an economic, financial and political crisis is of no advantage to Greece or its people," he said.  "So efforts will be made to keep Greece in the eurozone, to hold Greece's feet to the fire.  And try and get Greece to take reforms, economic, political and social reforms, which it should have undertaken any time over the past 20 years."

Eurozone leaders are not expected to meet again for several weeks.  But as the summer goes by and their problems mount, analysts say they may need to take action sooner, rather than later.

You May Like

How to Safeguard Your Mobile Privacy

As the digital world becomes more mobile, so too do concerns about eroding privacy and increased hacking More

'Desert Dancer' Chronicles Iranian Underground Dance Troupe

Film by Richard Raymond is based on true story of Afshin Ghaffarian and his friends More

Obesity Poses Complex Problem

Professor warns of obesity’s worldwide health impact More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Rolling Thunder Run Reveals Changed Attitudes Towards Vietnam Wari
X
Katherine Gypson
May 25, 2015 1:32 AM
For many US war veterans, the Memorial Day holiday is an opportunity to look back at a divisive conflict in the nation’s history and to remember those who did not make it home.
Video

Video Rolling Thunder Run Reveals Changed Attitudes Towards Vietnam War

For many US war veterans, the Memorial Day holiday is an opportunity to look back at a divisive conflict in the nation’s history and to remember those who did not make it home.
Video

Video Female American Soldiers: Healing Through Filmmaking

According to the United States Defense Department, there are more than 200-thousand women serving in the U.S. Armed Forces.  Like their male counterparts, females have experiences that can be very traumatic.  VOA's Bernard Shusman tells us about a program that is helping some American women in the military heal through filmmaking.
Video

Video Iowa Family's Sacrifice Shaped US Military Service for Generations

Few places in America have experienced war like Waterloo. This small town in the Midwest state of Iowa became famous during World War II not for what it accomplished, but what it lost. As VOA’s Kane Farabaugh reports, the legacy of one family’s sacrifice is still a reminder today of the real cost of war for all families on the homefront.
Video

Video On Film: How Dance Defies Iran's Political Oppression

'Desert Dancer' by filmmaker Richard Raymond is based on the true story of a group of young Iranians, who form an underground dance troupe in the Islamic Republic of Iran. This is the latest in a genre of films that focus on dance as a form of freedom of expression against political oppression and social injustice. VOA’s Penelope Poulou has more.
Video

Video Turkey's Ruling Party Trying to Lure Voters in Opposition Stronghold

Turkey’s AK (Justice and Development) Party is seeking a fourth successive general election victory, with the goal of securing two-thirds of the seats in Parliament to rewrite the constitution and change the country's parliamentary system into a presidential one. To achieve that, the party will need to win seats in opposition strongholds like the western city of Izmir. Dorian Jones reports.
Video

Video Millions Flock to Ethiopia Polls

Millions of Ethiopians cast their votes Sunday in the first national election since the 2012 death of longtime leader Meles Zenawi. Mr. Meles' party, the Ethiopian People's Revolutionary Democratic Front, is almost certain of victory again. VOA's Anita Powell reports from Addis Ababa.
Video

Video Scientists Testing Space Propulsion by Light

Can the sun - the heart of our solar system - power a spacecraft to the edge of our solar system? The answer may come from a just-launched small satellite designed to test the efficiency of solar sail propulsion. Once deployed, its large sail will catch the so-called solar wind and slowly reach what scientists hope to be substantial speed. VOA’s George Putic reports.
Video

Video FIFA Trains Somali Referees

As stability returns to the once lawless nation of Somalia, the world football governing body, FIFA, is helping to rebuild the country’s sport sector by training referees as well as its young footballers. Abdulaziz Billow has more from Mogadishu.
Video

Video With US Child Obesity Rates on the Rise, Program Promotes Health Eating

In its fifth year, FoodCorps puts more than 180 young Americans into 500 schools across the United States, where they focus on teaching students about nutrition, engaging them with hands-on activities, and improving their access to healthy foods whether in the cafeteria or the greater community. Aru Pande has more.
Video

Video Virginia Neighborhood Draws People to Nostalgic Main Street

In the U.S., people used to grow up in small towns with a main street lined by family-owned shops and restaurants. Today, however, many main streets are worn down and empty because shoppers have been lured away by shopping malls. But in the Del Ray neighborhood of Alexandria, Virginia, main street is thriving. VOA’s Deborah Block reports it has a nostalgic feel with its small restaurants and unique stores.

VOA Blogs