Italy's rating downgrade could speed up austerity: Germany

24th September 2011, Comments 0 comments

German Finance Minister Wolfgang Schaeuble said Saturday he hoped that a recent downgrade of Italy's debt would spur Rome to speed up implementing its recently adopted austerity measures.

"The leaders in Italy -- and in all the other countries -- must know that it is problematic to announce measures or to take on commitments and then not to follow through on them. That's how one loses the markets' confidence," Schaeuble said in an interview in the weekly WirtschaftsWoche.

"Perhaps Italy will see in the downgrade of its debt the opportunity to implement more quickly and with more diligence the (austerity) measures it has taken," he said of the eurozone's third largest economy.

Standard and Poor's this week lowered Italy's sovereign debt rating from "A+" to "A" citing weakness in Italy's growth outlook and "the fragility of the coalition in power".

Despite adopting a 54.2 billion euro austerity plan on September 14 designed to achieve a balanced budget in 2013 and reduce its massive debt (120 percent of GDP), Italy has not been able to reassure the markets which has doubts about the government's credibility.

"Confidence is currently the most important resource, but also the rarest," said the German minister, whose country is the eurozone's economic powerhouse.

Schaeuble added however that the Italian debt burden was "manageable" as "Italy is a solid country" and "its economic data are good".

Turning to Greece and its massive debt load, Schaeuble said he was rather optimistic that the country's competivity could be fully restored within a decade.

Greece deserved respect "in view of the enormous efforts" it had made, even though the country's burden does not always seem "to be shared equally if we are to believe press reports about yachts in Piraeus, Mykonos and elsewhere", said Schaeuble, referring to Athens' pervasive tax evasion problem.

But he said Greece's success was necessary if the endangered 17-member eurozone was to survive.

Otherwise, "The European Union would lose a huge part of its political credibility and its ability to negotiate in a globalised world," he added.

© 2011 AFP

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