Eurozone leaders meet in France
The German flag flys in the harbour in front of the Michel church during the German Unity day celebrations in October 3, 2008 in Hamburg, Germany.
Jeremy Hobson: The leaders of the eurozone's three largest economies -- Italy, France and Germany -- are meeting today in Strasbourg, France. And they're digesting the news just in that Portugal's credit rating has been downgraded to junk -- making it even more expensive for that country to borrow money. Meanwhile, Germany couldn't find enough buyers yesterday for $8 billion worth of debt.
Marketplace's Stephen Beard is with us now from London with the latest. Hi Stephen.
Stephen Beard: Hello Jeremy.
Hobson: So with all these things that have happened in the last 24 hours, what are they going to be tackling first at this meeting in Strasbourg?
Beard: Well, the purpose of the meeting is for the new Italian minister to spell out Italy's planned spending cuts. But as you suggested, it is possible the focus is going to shift a little -- especially onto Germany, after, as you mentioned, yesterday's failed bond auction. The German government failed to sell all the bonds it wanted to sell, raising the alarming possibility that this crisis has now hit the eurozone's strongest economy.
Hobson: And how does that change what they might do about the crisis, Stephen?
Beard: It may give the French more leverage. The French have been trying to persuade the Germans to loosen up and -- amond other things -- allow the European Central Bank to print money and buy vast quantities of government debt. The Germans have been resisting this, they believe it's inflationary. But now their own bonds have apparently been caught up in the crisis, they may relent.
Professor Albrecht Ritschl of the London School of Economics says the Germans face a stark choice.
Albrecht Ritschl: They will indeed have to be the decision between accepting a probably softer eurozone, or thinking seriously about going it alone.
Now, Germany leaving the eurozone, the collapse of the euro -- these remain unlikely because of the damage that could to do Germany, to Europe, and to the global economy. But the collapse of the euro is something more and more analysts and traders are talking about.
Hobson: Marketplace's Stephen Beard in London, thanks Stephen.
Beard: OK, Jeremy.