BERLIN (AP) — Chancellor Angela Merkel today downplayed Standard & Poor’s warning that it might cut the credit rating of 15 eurozone countries, including Germany’s, because the region’s financial crisis is worsening without any imminent fix.
The timing of the warning was noteworthy. It came just hours after Merkel and French President Nicolas Sarkozy urged changes to the European Union treaty that would centralize decision-making on spending and borrowing for the 17 countries that use the euro. Tighter political and economic coordination among euro countries is seen as a precursor to further financial aid from the European Central Bank, the International Monetary Fund, or some combination.
The threat to cut Germany’s prized AAA rating was particularly surprising. Its bonds are considered among the safest in the world. A downgrade threatens to complicate the eurozone’s bailout mechanism, since the region’s rescue fund relies on AAA- rated bonds of Germany and France to cheaply raise money.
Investors nevertheless seemed to take the S&P warning in stride today. European stocks and bonds mostly held onto the gains they made Monday.
“What a rating agency does is the responsibility of the rating agency,” Merkel told reporters in Berlin, refusing to elaborate further.
She said, however, that she expected a meeting of European leaders later this week in Brussels would help restore markets’ confidence.
“We will meet on Thursday and Friday as Europeans and take those decisions that we consider to be correct, and through them stabilize the eurozone and also regain confidence,” she said.
She and Sarkozy on Monday outlined sweeping plans to change the EU treaty in an effort to keep tighter checks on overspending nations. The proposal is set to form the basis of discussions at an EU summit in Brussels on Friday.
The financial markets of Italy and Spain rallied after Merkel and Sarkozy unveiled their proposals, suggesting investors are more confident Europe can survive the crisis.
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