Germany's strength doesn't protect from Moody's downgrade

German Chancellor Angela Merkel and members of government and parliament react as they cast their ballot to vote an aid package for Spain during a session of the Bundestag, the lower house of parliament in Berlin on July 19, 2012.

Jeff Horwich: Moody's Investors Service has lowered the outlook for the credit ratings of three of Europe's strongest economies: Luxembourg, the Netherlands and Germany. It's part of a busy day in Europe that has investors on-edge -- markets there are barely moving.

For more, the BBC's Steve Evans is with me from Berlin. Hello, Steve.

Steve Evans: Good morning to you.

Horwich: So Steve, we’re always hearing that Germany is in the best shape of anybody around -- why would they be downgraded by Moody’s?

Evans: In a way, they look like they may well be downgraded just because of their strength. In other words, Germany would pick up the bill if there’s a default by Greece, for example, and Moody’s is recognizing that it’s Germany which would pick up the tab.

Horwich: German and Spanish ministers are meeting in Germany today. What’s on the table for them?

Evans: Well clearly the crisis. The general idea was that the bailout of the Spanish banks -- what was it, three weeks ago -- was meant to be an end of the matter. But it’s a little bit like if you throw a bit of red meat at a ravenous beast, the danger is they get a taste for more. So the markets seem to be saying there will be more needed therefore, the signals needs to be sent there will be more to come.

Horwich: The Troika -- which is the EU, IMF and representatives of the European Central Bank -- are headed to Greece today, already there I presume, what do they need to hear from the Greek government?

Evans: What they need to hear is: Everything’s on track; therefore go away happy. But all the signs are they are actually saying, behind the scenes: We need more time. And the difficulty with that is the German people are not minded to give Greece more time or more money. There is a view in the German government that would be manageable -- Greece leaving the euro; that’s not a universal view.

Horwich: And hence, that brings us full circle, back to that downgrade we began talking about. The BBC Steven Evans in Berlin, thank you very much.

Evans: You’re welcome.   

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