Eurozone warned of credit downgrades after Germany and France strike deal

From The Guardian UK:

Merkel and Sarkozy spark relief in markets after agreeing package of measures to take to EU summit

The Guardian
, Monday 5 December 2011

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.

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Ireland, Italy and Greece face more cuts and tax rises

From The Guardian UK:

Austerity measures come days before critical EU summit which could force referendum on Irish constitution

, Ireland correspondent, Monday 5 December 2011

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.

In Italy the prime minister, Mario Monti, presented his austerity package to parliament and warned that without the reforms the country could become “the next Greece“.

“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.

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5 Responses to “Eurozone warned of credit downgrades after Germany and France strike deal”

  1. Andrea B. Says:

    Interesting timing.

    A downgrade for Germany from someone in the US, while German industrial orders have risen 5%.

    What European leaders think about the completely and utterly exaggerated warning from S&P, who by the way get most of there funding from Wall Street banks.,1518,801973,00.html

    US business reaction.

    The USA spin about the Germans stuffing Irish banks full of cheap money is complete and utter lies by liars and people who like to spread false anti-European propaganda.

    Central Bank data from Ireland clearly shows that that statements from USA commentators and those who regurgitate there verbal diarrhea are lying.



    In the ‘covered institutions’ spreadsheet from the central bank, look at Anglo, BoI, AIB, INBS, PTSB and EBS and check the liabilities tab for debt securities (bonds) and deposits.

    Most of the money loaned to Irish banks or deposited in Irish banks from 2003 onwards came from outside the euro area. Most of that money was from UK and USA institutions with the bul of it being from USA financial institutions, such as JP Morgan, Bank of America, Goldman Sachs, Barclays, etc, not Germany as the Wall Street, USA economics commentators and those who have a need to spin for Goldman Sachs and JP Morgan, would have everyone believe.

    At the time of the bank guarantee on all deposits and bonds by the Taosiech Brian Cowen in Sept 2008, of the €95bn owed in bonds, €23.5bn was owed to Irish institutions, €59.2bn to non-euro area institutions and €14.3bn from euro area institutions.

    Of the deposits from outside Ireland in Sept 2008, €25.3bn came from the euro area and €159.6bn from outside the euro area.

    Look at the monthly figures from 2003 onwards and you will see that euro area bond liabilities never exceeded €16bn and deposits never exceeded €28bn.

    The great myth that has been allowed to build up and become a sort of urban legend amongst commentators on the right and left, is that Irish banks were lent all this money by French and German banks, but that was clearly not the case as most of it came from the USA.

    Most of the money sloshing through Irish banks from 2003 onwards was British and American money – and most of the ‘bondholders’ who were paid by the Irish taxpayer are UK and USA – and Irish – institutions, as well as, to a lesser degree, euro area.

    For some reason, the myth has grown up it was the Germans, when it clearly was not them at all. It was the USA and UK with the USA being the main culprit in its criminal behaviour.

    It may suit the anti-EU/anti-German agendas of the Koch Brothers, US Republicans, UK conservatives and those with a hatred of anything positive in Europe, but has no bearing in reality.

    The Germans funnelled hundreds of billions of Euro’s through their IFSC subsidiaries in Dublin, but Ireland is not on the hook for that and never were. That’s Angela Merkel’s problem and has so far cost the German taxpayer somewhere about €100bn for Depfa alone, which looks set to rise to almost twice that, due to Depfa having taken on debt from US banks for reasons that no one understands.

    It was USA secretary of the Treasury Geitner, who made clear at the G20 meeting that Ireland is not allowed to default. He is quite adamant about that, as is the entire USA cabinet. That planely means that Irish people have to have austerity for the weak infirm, disabled, elderly and that debt in collapsed banks has to be paid by society so as to cover the greed of Goldman Sachs and its former employee’s who had taken over the Irish banking system turning it into a black hole fund for bailing out property developers who overpaid for everything and made massive loss’s.

    I really wish people would deal with the facts.

    This is the Irish National Debt clock, with the actual real figures, not the fantasy figures from the IMF-Wall Street.

    • Suzan Says:

      Tax payers and working people shouldn’t be force to pay for the gambling debts of the Banks and the rich elites. That is what all this financial turmoil is all about. Things like derivatives and hedges, credit default swaps, bett ing against losses and treating imaginary money as though it is real.

      Turns out that a few made vast sums of money convincing the majority of people that tere really was al sorts of money in the economy based on mathematical trickery.

      I think banking should be nationalize and most of the current crop of “investment bankers” should be tried then taken out an shot.

  2. Andrea B. Says:

    I agree.

    S&P have just screwed themselves and there paymasters in Goldman Sachs-JP Morgan.

    Financial transaction taxes are now inevitable in Europe, since this full scale and brutal politcal attack. Once it is up and running Asia could follow suit, followed eventually by Latin America.

    I really do think the neo-liberals have put the first serious nick in there own neck artery by this act, by attacking part of there own power base. Lets just hope they continue cutting.

  3. Andrea B. Says:

    PS: 5/% of Irelands €118 billion debt is owed directly to USA banks and about another 20% though various investment funds managed by USA banks.

    Thats why Geithner made clear that Ireland is not allowed to default, no matter what.

  4. Andrea B. Says:

    That was 57%

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