EU finance ministers again delay Greek aid, France downgraded
European finance ministers disagreed among themselves on Greece’s debt-reduction package.
With Germany and other creditors reluctant to come up with new funds or offer debt relief, the finance ministers were unable to put together enough money from other sources to help alleviate Greece’s debt burden which is projected to rise to 190 per cent of Gross Domestic Product by 2014.
Notwithstanding a number of rescue efforts during the past three years, Greece is still mired in a fiscal crisis. This raises doubts about the ability of the EU to resolve the crisis and maintains a cloud over the future of the single currency, the euro.
The next aid payment to Greece, which has been suspended since June, is therefore frozen until at least another emergency finance ministers’ meeting on Monday.
Meanwhile, credit rating agency Moody’s Investors Service dealt a blow to France as it cut the sovereign’s credit rating to Aa1 from Aaa. Moody’s also maintained a negative outlook on the country.
The downgrade came on the heels of Standard and Poor’s downgrade of France from the coveted AAA rating last January and puts more pressure on French President François Hollande to take measures to support growth in Europe’s second-largest economy as it battles the region’s debt crisis.
As reasons for the downgrade, Moody’s cited France’s long-term economic growth outlook and an uncertain fiscal outlook, which are leading to deteriorating economic prospects.
Finally, in the US, Federal Reserve chairman Ben Bernanke said an agreement by the country’s lawmakers on ways to reduce long-term federal budget deficits could remove an obstacle to growth.
Bernanke however stressed that if lawmakers fail to find a way of avoiding the so-called ‘fiscal cliff’, this would pose a “substantial threat” to the country’s nascent recovery.
This article was compiled by Bank of Valletta plc for general information purposes only.