German chancellor Angela Merkel has called on eurozone governments speedily to implement tough new fiscal rules after Standard & Poor’s downgraded the credit ratings of France and Austria and seven other second-tier sovereigns.
More austerity – exactly a reason S&P gave for the downgrade.
We also believe that the agreement [the latest euro rescue plan] is predicated on only a partial recognition of the source of the crisis: that the current financial turmoil stems primarily from fiscal profligacy at the periphery of the eurozone. In our view, however, the financial problems facing the eurozone are as much a consequence of rising external imbalances and divergences in competitiveness between the EMU’s core and the so-called “periphery”. As such, we believe that a reform process based on a pillar of fiscal austerity alone risks becoming self-defeating, as domestic demand falls in line with consumers’ rising concerns about job security and disposable incomes, eroding national tax revenues.
Yes, she ignored what S&P said in their report.
Of course this is the same reaction we are seeing from Republicans in the US – economy killing spending cuts along with tax cuts. Is the debt a problem? Yes! Can you solve that problem by killing the economy and reducing tax revenue? No! Clueless plutocrats and technocrats on both sides of the pond.