Fears over the finances of its eurozone partners are threatening Germany with the possible future loss of its AAA credit rating.
The country’s outlook has been changed from ‘stable’ to ‘negative’ by ratings agency Moody’s, which cited an increased burden on Germany should Greece leave the eurozone and Spain need a bailout.
However, countering the move by Moody’s, Germany’s finance ministry said the rating is a short-term view, and the country is “in a very sound economic and financial situation”.
Economic troubles experienced by other eurozone members will definitely have an effect on Germany according to financial analyst Mike Ingram of BGC Partners: “The credit markets have certainly been saying that the German sovereign debt is actually fundamentally riskier and given the trade and financial linkages that Germany has within a shaky eurozone, that probably shouldn’t come as any surprise.”
The country will remain Europe’s safe haven during the financial crisis, according to the German Chancellor Angela Merkel.
However, in Frankfurt, German shares were initially lower on the DAX on Tuesday morning – in reaction to the news of Moody’s more pessimistic outlook.