BBC World Service

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

Marketplace Contributor Jul 24, 2012
HTML EMBED:
COPY
BBC World Service

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

Marketplace Contributor Jul 24, 2012
HTML EMBED:
COPY

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.   

We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.