Europe to tighten spending rules
Source: Agencies |
January 16, 2012, Monday
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EUROPEAN leaders promised on Saturday to speed up plans to strengthen spending rules and get a permanent bailout fund up and running as soon as possible, a day after US agency Standard &Poor's cut the ratings of several eurozone countries' creditworthiness.
In a conference call with reporters and analysts after downgrading nine of the eurozone's 17 countries, Standard & Poor's said it saw continued risks from the debt crisis that has overshadowed Europe for the past two years and said the single currency area was heading towards recession.
"The policy response at the European level has in our view not kept up with the rising challenges in the eurozone," S&P credit analyst Moritz Kraemer said on the call, forecasting a 40 percent chance of eurozone economy falling by up to 1.5 percent in 2012.
In Germany - whose top AAA rating survived unscathed - Chancellor Angela Merkel said the downgrades underlined why a so-called "fiscal compact" must be signed by member states quickly, and the next bailout mechanism, known as the ESM, should be funded soon.
"We are now challenged to implement the fiscal compact even quicker ... and to do it resolutely, not to try to soften it," she said at a meeting of her conservative Christian Democrats in the city of Kiel.
"We will also work particularly to implement the permanent stability mechanism, the ESM, so soon as possible - this is important regarding investor trust," she added.
European Central Bank policymaker Joerg Asmussen warned that Europe's drive to tighten fiscal rules was being softened, considering the latest draft of the agreement a "substantial watering down" of budgetary discipline because it would allow extra spending in extraordinary circumstances, the Financial Times Deutschland reported.
Leaders have urged countries to tighten their belts with higher taxes and spending cuts to rein in huge budget gaps.
In a conference call with reporters and analysts after downgrading nine of the eurozone's 17 countries, Standard & Poor's said it saw continued risks from the debt crisis that has overshadowed Europe for the past two years and said the single currency area was heading towards recession.
"The policy response at the European level has in our view not kept up with the rising challenges in the eurozone," S&P credit analyst Moritz Kraemer said on the call, forecasting a 40 percent chance of eurozone economy falling by up to 1.5 percent in 2012.
In Germany - whose top AAA rating survived unscathed - Chancellor Angela Merkel said the downgrades underlined why a so-called "fiscal compact" must be signed by member states quickly, and the next bailout mechanism, known as the ESM, should be funded soon.
"We are now challenged to implement the fiscal compact even quicker ... and to do it resolutely, not to try to soften it," she said at a meeting of her conservative Christian Democrats in the city of Kiel.
"We will also work particularly to implement the permanent stability mechanism, the ESM, so soon as possible - this is important regarding investor trust," she added.
European Central Bank policymaker Joerg Asmussen warned that Europe's drive to tighten fiscal rules was being softened, considering the latest draft of the agreement a "substantial watering down" of budgetary discipline because it would allow extra spending in extraordinary circumstances, the Financial Times Deutschland reported.
Leaders have urged countries to tighten their belts with higher taxes and spending cuts to rein in huge budget gaps.
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