The approach of eurozone leaders to the crisis in their region has so far been a piecemeal, sticking plaster approach. But this morning, calls are growing for big and effective bandages to bind up the wounds before it is too late.
Late last night, ratings agency Moody’s warned that the size of those bandages was so big that containing the shock of a Greek exit from the euro would come ‘at a very high cost’, and that ‘greater collective support’ for Spain and Italy would place a heavy burden on those eurozone members with higher credit ratings.
Hence the downgrades from the agency for Germany, Luxembourg and the Netherlands, while Finland retained its Aaa stable rating. Moody’s gave these two reasons for the rating changes:
1. The rising uncertainty regarding the outcome of the euro area debt crisis given the current policy framework, and the increased susceptibility to event risk stemming from the increased likelihood of Greece’s exit from the euro area, including the broader impact that such an event would have on euro area members, particularly Spain and Italy.
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