AFP
12/16/2011
Fitch Ratings cast doubt Friday on the budget discipline pact European states intend to adopt being able to solve the eurozone debt crisis, and warned it may soon downgrade six countries, including Spain and Italy.
Also Friday, Moody’s ratings agency took action against a eurozone member, downgrading Belgium’s credit rating by two notches.
Fitch also changed the outlook on France’s top triple-A rating to negative.
“Fitch has concluded that a ‘comprehensive solution’ to the eurozone crisis is technically and politically beyond reach,” following the crisis summit last week at which the pact was announced, it said.
All EU states except for Britain agreed last week to draft a strict pact with penalties to ensure they cut budget deficits and reduce their debt, aiming to get it drafted and signed by March.
While Fitch praised announcements that private bond holders would no longer be asked to accept losses in bailouts and the eurozone’s permanent bailout fund would be brought into operation sooner, it expressed concerned over the absence of a credible financial backstop.
“In Fitch’s opinion this requires more active and explicit commitment from the ECB to mitigate the risk of self-fulfilling liquidity crises for potentially illiquid but solvent Euro Area Member States (EAMS),” it said in a statement.
The European Central Bank, strongly supported by Germany, has resisted stepping up its limited purchases of bonds of eurozone states, let alone explicitly taking on the role of a lender of last resort to governments…
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