News / Europe

S&P Threatens Downgrade for Europe Bailout Fund

The map of Europe is featured on the face of a two Euro coin seen in this photo illustration taken in Rome, December 3, 2011.
The map of Europe is featured on the face of a two Euro coin seen in this photo illustration taken in Rome, December 3, 2011.

The credit agency Standard & Poor's is now threatening to downgrade the top rating of the bailout fund for Europe's debt-ridden countries.

S&P issued the warning Tuesday, a day after it placed 15 of the 17 nations that use the euro, including economic powerhouses Germany and France, on a negative credit watch.

The credit agency said it would decide within 90 days whether to cut the AAA credit rating for the bailout agency by one or two notches after determining whether the credit standing of any of the individual countries should be trimmed.

A debt analyst for S&P, Moritz Kraemer, said at a Frankfurt news conference that it issued the warnings because European officials have made "a very slow and reluctant response" to the continent's debt crisis. He expressed skepticism that European leaders would act at a summit later this week to resolve the two-year debt contagion.

Kraemer said the effects of the debt crisis have spread through the continent and could worsen.

"Well, it's our opinion that the financial crisis that we are witnessing in the eurozone is no longer a crisis of individual countries on the periphery. We think it has taken a more systemic trajectory. It has been spreading into some core countries and also financial institutions in the core countries," Kraemer said. "It has deepened on the periphery. So we think that the current situation has the potential to destabilize further."

If the credit rating for the $591 billion bailout fund is cut, it would boost the borrowing costs to assist debt-ridden countries. Greece, Ireland and Portugal have already needed international assistance and analysts fear that Italy and Spain, with the continent's third and fourth largest economies, also might need help.

U.S.Treasury Secretary Timothy Geithner (L) leaves the headquarters of the European Central Bank (ECB) in Frankfurt, December 6, 2011
U.S.Treasury Secretary Timothy Geithner (L) leaves the headquarters of the European Central Bank (ECB) in Frankfurt, December 6, 2011

U.S. Treasury Secretary Timothy Geithner traveled to Europe Tuesday to prod the continent's leaders to take decisive action. He said the U.S. is encouraged that European leaders are taking steps to alleviate the crisis, while acknowledging that American policy makers face their own economic challenges.

Geithner is meeting with German Chancellor Angela Merkel and European Central Bank President Mario Draghi to warn that further delays could imperil the world economy, including the sluggish recovery in the American economy, the world's largest.

Ms. Merkel and French President Nicolas Sarkozy unveiled a plan Monday for tighter controls over the spending of individual governments. They called for changes to the treaty governing the 27-nation European Union, or at least covering budgets in the 17-nation eurozone.

European officials criticized the S&P threat of a downgrade, saying it ignored new efforts to resolve the crisis and the plans for unified action at the Brussels summit Thursday and Friday.

Ms. Merkel vowed that Europe would act and downplayed the significance of the possibility of an S&P ratings cut.

"What a rating agency does is the responsibility of the rating agency. On Thursday and Friday we will make the decisions which we think are important and indispensable for the eurozone and therefore contribute to the stabilization of the eurozone," Merkel said. "I also think we will regain confidence. I have always said this is a long process and it will continue for some time, but we charted the course yesterday with the French president and we will continue to stay the course."

All 27 EU nations would have to approve changes to the 1992 Maastricht Treaty that created the EU, but broad approval would not be necessary if spending controls apply only to the eurozone.

Some information for this report was provided by AP and AFP.

You May Like

Video In US, Columbus Day Still Generates Controversy

Holiday marks date Columbus discovered Americas, but some are offended by legacy because he enslaved many natives he encountered More

Video Through Sports, Austria Tries to Give Migrants Traction

With 85,000 people expected to claim asylum in Austria this year, its government has made integration through joint physical activities a key objective More

Video Kickboxing Champion Shares Sport With Young Migrants

Pouring into Europe by hundreds of thousands, some migrants, especially youngsters, are finding sports a way to integrate into new host countries More

This forum has been closed.
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Amnesty Accuses Saudi Coalition of ‘War Crimes’ in Yemeni
Henry Ridgwell
October 12, 2015 4:03 PM
The human rights group Amnesty International has accused the Saudi-led coalition of war crimes in airstrikes against Houthi rebels in Yemen. Henry Ridgwell reports the group says hundreds of civilians have been killed in strikes on residential areas.

Video Amnesty Accuses Saudi Coalition of ‘War Crimes’ in Yemen

The human rights group Amnesty International has accused the Saudi-led coalition of war crimes in airstrikes against Houthi rebels in Yemen. Henry Ridgwell reports the group says hundreds of civilians have been killed in strikes on residential areas.

Video No Resolution in Sight to US House Speaker Drama

Uncertainty grips the U.S. Congress, where no consensus replacement has emerged to succeed Republican House Speaker John Boehner after his surprise resignation announcement. Half of Congress is effectively leaderless weeks before America risks defaulting on its national debt and enduring another partial government shutdown.

Video New Art Exhibit Focuses on Hope

Out of struggle and despair often comes hope. That idea is behind a new art exhibit at the American Visionary Art Museum in Baltimore, Maryland. "The Big Hope Show" features 25 artists, some of whom overcame trauma and loss. VOA’s Deborah Block reports.

Video Columbus Day Still Generates Controversy as US Holiday

The second Monday of October is Columbus Day in the United States, honoring explorer Christopher Columbus and his discovery of the Americas. The achievement is a source of pride for many, but for some the holiday is marked by controversy. Adrianna Zhang has more.

Video Anger Simmers as Turks Begin to Bury Blast Victims

The Turkish army carried out new air strikes on Kurdistan Workers Party (PKK) targets on Sunday, a day after the banned group announced a unilateral cease fire. The air raids apparently are in retaliation for the Saturday bombing in Turkey's capital Ankara that killed at least 95 people and wounded more than 200 others. But as Zlatica Hoke reports, there are suspicions that Islamic State is involved.

Video Bombings a Sign of Turkey’s Deep Troubles

Turkey has begun a three-day period of mourning following Saturday’s bomb attacks in the capital, Ankara, that killed nearly 100 people. With contentious parliamentary elections three weeks away, the attacks highlight the challenges Turkey is facing as it struggles with ethnic friction, an ongoing migrant crisis, and growing tensions with Russia. VOA Europe correspondent Luis Ramirez reports.

Video Afghanistan’s Progress Aided by US Academic Center

Recent combat in Afghanistan has shifted world attention back to the central Asian nation’s continuing civil war and economic challenges. But, while there are many vexing problems facing Afghanistan’s government and people, a group of academics in Omaha, Nebraska has kept a strong faith in the nation’s future through programs to improve education. VOA’s Greg Flakus has more from Omaha, Nebraska.

Video House Republicans in Chaos as Speaker Favorite Withdraws

The Republican widely expected to become the next speaker of the House of Representatives shocked his colleagues Thursday by announcing he was withdrawing his candidacy. The decision by Majority Leader Kevin McCarthy means the race to succeed retiring Speaker John Boehner is now wide open. VOA National Correspondent Jim Malone reports.

Video German, US Officials Investigate Volkswagen

German officials have taken steps to restore some of the reputation their car industry has lost after a recent Volkswagen diesel emissions scandal. Authorities have searched Volkswagen headquarters and other locations in an effort to identify the culprits in the creation of software that helps cheat on emission tests. Meanwhile, a group of lawmakers in Washington held a hearing to get to the bottom of the cheating strategy that was first discovered in the United States. Zlatica Hoke reports.

Video Why Are Gun Laws So Hard for Congress to Tackle?

Since taking office, President Barack Obama has spoken out or issued statements about 15 mass shootings. The most recent shooting, in which 10 people were killed at a community college, sparked outrage over the nation's gun laws. But changing those laws isn't as easy as many think. VOA's Carolyn Presutti reports.

Video In 'He Named Me Malala,' Guggenheim Finds Normal in Extraordinary

Davis Guggenheim’s documentary "He Named Me Malala" offers a probing look into the life of 18-year-old Malala Yousafsai, the Pakistani teenager who, in 2012, was shot in the head by the Taliban for standing up for her right to education in her hometown in Pakistan's Swat Valley. Guggenheim shows how, since then, Malala has become a symbol not as a victim of brutal violence, but as an advocate for girls’ education throughout the world. VOA’s Penelope Poulou has more.

Video Paintable Solar Cells May Someday Replace Silicon-Based Panels

Solar panels today are still factory-manufactured, with the use of some highly toxic substances such as cadmium chloride. But a researcher at St. Mary’s College, Maryland, says we are close to being able to create solar panels by painting them on a suitable surface, using nontoxic solutions. VOA’s George Putic reports.

VOA Blogs