The markets have been sceptical for a while now about the euro zone’s prospects. These fears are now being confirmed by rating agencies. On Monday, Moody’s revised its outlook for the sovereign ratings of Germany, the Netherlands and Luxembourg from stable to negative.
There are two reasons for renewed fears. One is about the increased likelihood of a Greek exit from the euro area. Then there are concerns about the effects of helping the distressed Spanish and Italian economies on the more robust economies of the euro zone. The burden of such “help” is likely to fall disproportionately on Germany.
It is the scale of what will be needed to keep Spain and other economies afloat that seems to be spooking the markets. Moody’s is only reflecting what is out in the open.
