From The Guardian UK: http://www.guardian.co.uk/business/2011/dec/05/eurozone-credit-downgrade-germany-france
Merkel and Sarkozy spark relief in markets after agreeing package of measures to take to EU summit
The grand bargain struck by Germany and France to save the euro and restore confidence in the single currency was facing its first challenge within hours of being negotiated, after 15 eurozone nations were warned that their credit ratings could be downgraded.
Just after crunch talks in Paris seen as vital to preventing the collapse of the euro, France and Germany were among the countries warned that Standard & Poor’s was considering whether to reduce their ratings.
The German chancellor, Angela Merkel, and the French president, Nicolas Sarkozy, had earlier brought relief to the markets after agreeing a package of measures to take to an EU summit on Thursday, at which the deal is likely to be contested, but will probably be blessed.
Merkel and Sarkozy called for the Lisbon treaty to be reopened to facilitate the new eurozone deal but both agreed that if it ran into insuperable resistance, the 17 countries of the eurozone would themselves forge a new euro pact.
Although the announcement in Paris brought instant relief for the beleaguered euro, the pressure on the currency was short lived as rumours of the S&P action swirled just before the US markets shut. The Dow Jones closed up 78 points, giving up much of a 167-point gain it had made earlier in the day.
Ireland, Italy and Greece face more cuts and tax rises
From The Guardian UK: http://www.guardian.co.uk/world/2011/dec/05/cuts-tax-rises-ireland-italy
Austerity measures come days before critical EU summit which could force referendum on Irish constitution
Ireland faces more heavy cuts in public spending next year, with welfare and health departments taking the brunt of the pain under the country’s latest austerity budget outlined on Monday.
The public expenditure and reform minister, Brendan Howlin, said spending would be cut by 2.7%, amounting to €1.4bn (£1.2bn) of reductions, in the first part of a budget which will continue with announcements on tax increases from the finance minister Michael Noonan on Tuesday.
The austerity measures come days before the critical EU summit on Friday which could force Ireland back to the ballot box in the new year. If a new treaty emerges from the meeting of EU leaders, the Fine Gael-Labour government would be obliged to hold a referendum under the Irish constitution. Given the unpopularity of the coalition’s cost-cutting programme, there is no guarantee Ireland would endorse the treaty and a rejection could plunge the entire EU into further political and economic chaos.
“If Italy were not capable of reversing the negative spiral of growth in debt and restoring confidence to international markets, there would be dramatic consequences, which could go as far as putting the survival of the common currency at risk,” Monti told parliament. “Italy is ready to do what it has to do but Europe must not fail to do its part,” he said.
Continue reading at: http://www.guardian.co.uk/world/2011/dec/05/cuts-tax-rises-ireland-italy