Italian bond rates are on the way up again. Spanish bonds are following in their wake. Among the credit rating agencies, Moody’s said the euro zone deal last week was weak and added little to previous emergency summits. Standard & Poor’s is expected to strip France of its AAA status any day.
The market remains uneasy and for good reason. As has already been said, the EU is huddling closer together against the chill winds blowing from the debt markets. All the spare money in the kitty is going to pay debt.
The need of the hour is solidarity. However, the imposition of debt repayment conditions by Berlin is seen as a dampner.
The German solution to the problem is to impose a “reverse Versailles” (the World War 1 treaty that demanded Germany repay its debts to France, Britain and Belgium.
Everyone that owes money after the credit crunch must repay in full. Failure will be met with punishment, possibly ejection from the eurozone.
S&P shocker for euro zone
Ratings agency Standard & Poor’s (S&P) put more pressure on the euro zone, with its chief economist saying that time was running out for the currency bloc to resolve its debt problems and that it might need another financial shock to get it moving.
Jean-Michel Six, chief economist, said the last week's EU summit agreement was a significant step forward, but not enough. S&P usually takes around three months to act after a warning, but has said that in this case it may do so more quickly.
“There is probably yet another shock required before everybody in the euro zone reads from the same page,” said Six.