Covered by both Der Spiegel and the Voice of Russia
Jean Claude Junker, Prime Minister of the EU’s wealthiest member nation and head of Eurogroup, the EU’s monetary union committee has sharply criticized Standard & Poor's threat to downgrade the AAA credit ratings of leading Eurozone economies as wild exaggeration. The ratings agency Standard and Poor’s is exerting pressure on Eurozone member nations to slash their budgets overnight as an answer to the Euro area debt crisis.
Juncker said the S&P announcement was "a knockout blow" to countries that were cutting their budget deficits. "I find what Standard & Poor is saying completely exaggerated," Juncker told Deutschlandfunk radio. "I have to wonder that this news reaches us out of the clear blue sky at the time of the European summit; this can't be a coincidence."
The Hysteria of the Moment – A Self-Fulfilling Prophecy
When one looks up news on the Eurozone crisis, economic coverage almost invariably focuses on Greece, one of the Eurozone’s smallest and poorest member nations. Greece’s population represents just 1/40th of the Eurozone’s population, and even less of the region’s GDP. How is it then that the bankruptcy of such a small player in the European market can lead to headlines proclaiming that”The Euro is Dead” in places such as in the Economist and Der Spiegel?
In US terms, it would be as if the economic collapse of Vermont and Rhode Island would prompt the Wall Street Journal to print the headline “The Death of the US Dollar”. It’s more than a bit ridiculous.
Shock Doctrine – The Euro Edition
No matter what one says about the Eurozone Debt Crisis, one thing is certain: The Leaders and the Parliaments of the Euro-area nations have turned to IMF-backed austerity measures as a way out of the Eurozone crisis. This is not just limited to Greece, where the crisis actually is. Portugal is a country who has passed an extremely austere budget – and suffered the consequences of the ensuing economic destruction – due to lack of confidence in Portuguese sovereign bonds and financial markets. This is all despite no fundamental economic changes or banking collapses over the over the past decade and a half.
The pressure from S&P has become so large that 15 of 17 Eurozone members have been threatened with a ratings downgrade if the Eurozone crisis is not resolved in December 2011. This list includes Germany. The ones not included – Cyprus and Greece. In other words, the pressure is on to get austerity packages pushed into the entire EU- and the default of 1/40th of its population is the pretext for all of this madness.
The Germans however, are not intimidated. "Germany will not let itself be influenced by ... the short-lived verdict of one ratings agency," said German Finance Minster Phillip Rösler, Reuters reported. "We think nothing of such threats. We have no difficulties on the financial markets." Investors for their part have not lost confidence in German bonds, preferring to believe the fundamentals rather than the hype.
Jean-Claude Juncker is the Prime Minster of Luxembourg, the EU’s wealthiest member nation. He is the longest standing head of government of any European Union state. Juncker has also been president of the Euro Group since 2005.