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Summary Moody's took the first step toward stripping Germany of its coveted AAA credit rating on Monday.
It has cut the outlook for Europes largest and most pivotal economy to negative.Delivering a stark warning that no one is immune from the eurozones rolling crisis, the ratings agency lowered Germanys credit outlook from stable to negative.A similar move was announced for fellow AAA ranked economies, the Netherlands and Luxembourg.Moodys said all three faced risks from Greece leaving the eurozone and from the need to stump up cash for potential bailouts for Spain and Italy.In Germany, the finance ministry immediately shot back by saying the country remained the eurozones anchor of stability.The ministry said it had taken note of Moodys opinion while stating the estimate put the focus on short-term risks, while stability prospects in the long term are not mentioned.The eurozone has initiated a series of measures which should lead to the durable stabilising of the zone, the ministry said.Germany itself is in a solid economic and financial situation, it insisted in a statement.Moodys rationale for the downgrade appeared to hinge on a likely deepening of the crisis, which appeared to be reaching a fresh denouement Monday as Spanish borrowing costs soared and Greek reforms were on the rocks.The level of uncertainty about the outlook for the euro area, and the potential impact of plausible scenarios on member states, are no longer consistent with stable outlooks, Moodys said.Even if Greece survives, the agency warned that richer nations would likely shoulder greater burdens in future.The continued deterioration in Spain and Italys macroeconomic and funding environment has increased the risk that they will require some kind of external support.That would send the eurozone crisis to a different level, it said.Spains economy and government bond market is around double the combined size of those of Greece, Portugal and Ireland, Moodys said referring to the three already bailed-out eurozone nations.While Berlin has, until now, been largely unscathed by the crisis -- borrowing at below zero percent interest -- it has been at the very center of Europes political storm.The government of Chancellor Angela Merkel has repeatedly been frequently criticized for its austerity-first approach and for not getting ahead of the crisis.Moodys reiterated those concerns, pointing to a reactive and gradualist policy response by European leaders as cause of concern.Germany, which is reluctant to have its taxpayers on the hook for profligate spending in southern Europe said it would do all it can with its partners to overcome the European debt crisis as quickly as possible.Moodys also announced that Finlands AAA rating and outlook were unchanged.On Tuesday German Finance Minister Wolfgang Schaeuble will hold talks with Spanish Economy Minister in Berlin.Financial markets have turned against Madrid in recent weeks after an initially positive reaction to a massive 65-billion-euro austerity package turned sour. Each new initiative has failed to hold the line.
