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Germany shows EU solidarity but keeps up demands

Germany displayed unflinching solidarity with its European partners after nine saw their credit ratings downgraded but did not let up the pressure for stricter policing of spending.

Both Finance Minister Wolfgang Schaeuble and Chancellor Angela Merkel were at pains to reassure investors after France and Austria were stripped of their top triple-A credit ratings.

They both sought to downplay the impact of Standard and Poor’s decision which also saw nine of the 17 eurozone countries have their ratings downgraded while Berlin maintained its triple-A status.

From her position as leader of Europe’s top economy and the last big eurozone country to enjoy a top credit rating, Merkel was quick to underscore her solidarity with Paris.

She pointed out that Fitch ratings agency had said earlier in the week it did not foresee a downgrade for France in 2012 unless the country received significant economic shocks.

Speaking to reporters in the northern city of Kiel where her conservative Christian Democratic Union was gathered, she added that an AA+ is “really not a bad rating”.

For his part, Schaeuble commented that “we are not indifferent” to the downgrades which risk increasing borrowing costs for those countries affected and impacting on the eurozone bailout fund.

“I think we are all closely connected…” he said, adding that France, which as Europe’s second biggest economy is also being looked to, together with Germany, for leadership out of the euro crisis, was “on the right track”.

Several other German politicians were unconvinced, however.

Frank Schaeffler, a leading eurosceptic in the Free Democratic Party, a junior partner in Merkel’s coalition, warned that Germany’s contribution to keeping the European Financial Stability Facility’s top credit rating would nearly double.

German guarantees to the EFSF amounting to 211 billion euros ($267 billion) will not be sufficient, he said, adding: “That will in time also put pressure on the German rating.”

But such dissenting voices are few and far between within the ruling coalition, Carsten Koschmieder, a political scientist, told AFP.

“Opponents of Merkel’s European policy find a new argument in the downgrade of Friday but they have no impact on the policy of the government,” he said.

The latest polls showed an increase in support for Merkel’s conservative Christian Democratic Union suggesting approval for her handling of the euro crisis.

“People feel pride in seeing Germany coming out better than the others. The lowering of ratings… strengthens the chancellor on the domestic political stage,” Merkel’s biographer Gerd Langguth, of the Institute for Political Science and Sociology at Bonn University, said.

However, the crisis seems to be gradually catching up with Germany as data showed last week that the debt crisis brought Europe’s biggest economy almost to a halt in the final months of last year.

The German government is also expected to announce a downwardly revised growth forecast for 2012, according to the Handelsblatt daily.

Against this background, it could prove difficult to secure backing for any increase in Germany’s contribution to the bailout fund, but Merkel dismissed concerns after the S&P move.

“I do not believe that the downgrade in any way has an influence on Germany having to do more compared to others.”

She did, however, say the move highlighted the need to swiftly implement a new EU pact for tighter economic integration agreed by EU leaders, apart from Britain, last month.

“We are now called upon to implement quickly the fiscal pact, to implement it with determination … and not try to again soften it,” she said.

  1. January 18, 2012 at 6:53 am

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