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Germany’s Credit

Posted Aug. 01, 2012, at 6:44 p.m.

It would once have seemed impossible that the creditworthiness of Germany would be questioned by the credit ratings agencies, but the febrile state of the eurozone is such that this is what Moody’s has done. It has not downgraded the country but says the outlook is negative. France lost its AAA status earlier. The standing of the agencies themselves has never recovered from their calamitous misjudgments prior to the credit crunch, but Moody’s has a point. Germany is not being judged on its own merits — it is still a rock-hard, export-led economy, unlike Britain — but it is being called on to be paymaster for the eurozone, which no economy can sustain for long.

The economic crisis in the Spanish regions has caused a fall in the markets, here as elsewhere. The yields on its bonds are unsustainable. Meanwhile, members of the international troika are visiting Greece to determine if it is to receive the latest installment of its bailout funding, despite evidence that, because growth there is so weak, it has not fulfilled the conditions. There is now renewed talk about Greece’s departure from the euro; this is not a surprise so much as the fact that the prospect is viewed so calmly in Berlin. The eurozone crisis has not gone away because its underlying causes are still very much in evidence.

London Evening Standard (July 24)

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