Government warns it will not permit overvaluation of real
16 de setembro de 2010STF discutirá se derruba Ficha Limpa por completo
23 de setembro de 2010Ratings should make it easier to help eurozone member states through financial crises.
The EU’s attempts to reassure the markets that its member states are safe from default received a boost today (20 September) when the ‘big three’ credit-ratings agencies – Standard and Poor’s, Moody’s and Fitch – give their highest possible ratings to a eurozone rescue fund.
The ratings are AAA from Standard and Poor’s and Fitch, and Aaa from Moody’s.
The decision was welcomed by Klaus Regling, the chief executive of the fund, which is known as the European Financial Stability Facility (EFSF).
“The top credit ratings are key to our commitment to support euro area member states in financial difficulty,” Regling said, adding that the ratings are “clear confirmation that the EFSF can play its envisaged role and be one of the cornerstones of Europe’s strategy to maintain financial stability of the eurozone sovereign debt market”.
Eurozone governments agreed in May to create the EFSF to prove to markets that a national government using the single currency would not be allowed to default on its debts. This was in response to rampant concerns on the financial markets about the quality of the eurozone’s public finances, sparked by Greece’s near-default and by its appeal for support from other governments in April.
The facility, which became fully operational on 4 August, has been given a budget of €440 billion by the 16 members of the eurozone (plus Sweden and Poland, which are voluntarily participating). The International Monetary Fund (IMF) has said that it would be willing, if needed, to contribute another €220bn to support the EFSF’s lending.
Should a eurozone country fall into financial difficulties, and EFSF assistance is approved by governments, the facility would issue its own bonds to raise money from investors for conditional loans to the member state in need.
The credit ratings announced today apply to these EFSF bonds.
Irish worries
The ratings agencies’ announcement is timely as it coincides with mounting market concerns about public finances in Ireland. The amount of interest demanded by investors on Ireland’s sovereign debt has reached record levels in recent days. The yield on its ten-year bonds on Friday peaked at a record 6.3%. The markets’ concerns have been prompted largely by the rising costs of the government’s decision to rescue and break up Anglo Irish Bank.
The Irish government has repeatedly been forced to deny rumours that it will seek aid from the EFSF and the IMF.
Patrick Honohan, Ireland’s central bank governor, said today that the high interest that Ireland is being forced to pay on its debt may prevent the country from bringing its budget deficit to within 3% of gross domestic product by 2014 – the deadline it has agreed with other member states.
