Germany’s AAA credit rating could be reduced in the future.
The
once strong economy of Germany, that has held the coveted AAA rating for
several years, is now facing a negative outlook from Moody’s. In other words,
the current rating will be reviewed and can be reduced in the near future.
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As
the Eurozone crisis lingers on, the most powerful European economies are about
to face some real effects of the worsening debt crisis. Besides Germany, the
ratings of Netherlands and Luxembourg, two of the continent’s highest rated
economies, were also given a negative outlook by Moody’s.
The
ratings agency has cited the debt crisis and a possible Greek exit from
Eurozone, as the primary reason behind this move. Other European countries,
such as Italy and Spain, whose economies are going through severe recession,
have so far not called for a bailout. The ratings agencies however, are aware
that sooner or later, stronger economies such as Germany, might have to open
their pockets to support them. Furthermore, if Greece decides to leave Euro
then that "would set off a chain of financial sector shocks" and
Germany might find itself in a very difficult position.
Moody’s
has said in a statement, that even if Greece’s exit is somehow avoided, “there
is an increasing likelihood that greater collective support for other euro area
sovereigns, most notably Spain and Italy, will be required” and “the burden
will likely fall most heavily on more highly rated member states [such as
Germany]”
Responding
to the decrease in ratings, the German Finance Ministry belives that the
economic foundations of the country are strong it “will retain its 'safe haven'
status and continue to play its role as the anchor in the euro zone
responsibly,"
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