France, Germany facing debt rating downgrade as Eurozone wavers
Standard & Poor's, the debt rating agency that downgrades U.S. debt this summer has issued a warning that France, Germany and 13 other European Union countries, those using the Euro, may see their credit ratings reduced.
Some 15 European Union countries are having their credit reviewed by Standard & Poor's, the credit agency announced Monday.
That means all 17 Eurozone countries are either being reviewed for a downgrade or have already had their credit reduced to the lowest level — as is the case in Greece. At risk is the sterling, AAA credit rating for countries like Germany and France and ratings for other countris like Spain, Ireland and Italy, among others.
Leaders from France and Germany met Monday in advance of a meeting on Thursday in an effort to present a united front and find a way out of the problems the Eurozone economies are facing. Claus Deiter Heinze, a German businessman, said the whole problem has been dragging on for two years and the move by S&P is really a reaction to the endless discussions going on in Europe.
"One has to come up to a decision. As a businessman, you can't wait for two years," he said.
Heinze said if he expects this continued talk, without action, goes on, it makes the markets very nervous.
"This brings the whole economy and instability we don't need. We have to make business. We have to sell products. We don't need to go back to the currencies we had in Europe. I'm getting a little bit nervous," he said.
The United States lost its AAA rating from S&P back in August during the wrangling over the debt ceiling.
Louise Story, Wall Street and finance reporter for The New York Times, said the meeting on Thursday will go a long way toward determining whether credit ratings are downgraded. The proposal from France and Germany they will consider would involve modifying the European Treaty so that any country that operates with a budget deficit of a certain size or for a certain period of time, would face automatic sanctions.
"This does not exist today. They want to impose this for maybe all 27 nations in the European Union, that's even ones that don't have the euro, like Britian. At a minimum, they want to have these sanctions for the 17 countries in the Eurozone," Story said.
But the problem, according to Story, is the two years of talk Heinze bemoaned. For two years, European leaders have said they were going to solve this problem, only to still be grppling with it.
"Every time they come out with a deal, it needs sign offs, often by the parliaments in each country," Story said.
Even if the 17 nations agree this week, filling out the details could take until March.
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