Europe’s debt crisis is starting to cast wider shadows as the rating agency Moody’s changed its outlook for Germany from stable to negative – a first move towards downgrading Berlin’s cherished AAA credit status.
Moody’s blamed an increased chance that Greece could leave the eurozone which would set off a very costly “chain of financial sector shocks:
David Kohl, Chief Economist with Julius Baer Bank, said: “Initially, it is only a warning shot. It’s too early to be really concerned about this, and to be worried about the intrinsic value of German government bonds. That’s what it’s all about, the outlook for government bonds, how good is their credit rating. But they do still have the AAA rating.”
The Netherlands and Luxembourg also had their outlook changed to negative, but it is Germany that has become the region’s paymaster due to its economic strength.
The German Finance Ministry said the country would remain an anchor of stability in the 17-nation eurozone, adding that Moody’s was focusing on short-term risks.
However, the Moody’s warning is fuelling resentment over eurozone bailouts and against the rating agency itself.
On the streets of Berlin there was concern as well as some suspicion about motives. Heinz Adoph said: “I would prefer to get out now – or rather to prompt Greece to get out. Because we’re have to carry the entire bailout package and that’s why I am worried.”
Wolfgang Stephan added: “Moody’s just had to come up with something during the summer slump. I think here in Germany we are quite stable. And I don’t think it’s wise to undermine that with some random assumptions.”
The credit rating outlook change is unlikely to increase Berlin’s borrowing costs as it is seen as a safe haven by investors but the move may strengthen the German people’s opposition to more bailouts making it more difficult for Chancellor Angela Merkel to back aid for Greece, Spain and even Italy.