Dec. 12 (Bloomberg) -- Fitch Ratings said last week’s European Union summit has done little to ease pressure on the governments struggling with the region’s sovereign debt crisis.
“The lack of a comprehensive solution has increased short- term pressure on euro-zone sovereign credit profiles and ratings,” Fitch said in a statement today. “It means the crisis will continue at varying levels of intensity throughout 2012 and probably beyond, until the region is able to sustain broad economic recovery.”
Stocks and the euro tumbled today after Moody’s Investors Service said the EU summit offered few new measures and doesn’t diminish the risk of credit downgrades on European nations. Standard & Poor’s placed the ratings of 15 euro nations, including AAA rated France and Germany, on review for possible downgrade on Dec. 5 pending an assessment of the summit.
Fitch said it forecasts a “significant economic downturn across the region” in the short term and sees growth of 0.4 percent next year. It said the European Central Bank can provide the “only truly credible ‘firewall’ against liquidity and even solvency crises” either by buying sovereign bonds or allowing the region’s rescue funds access to its balance sheet.
“Hopes that the ECB would step up its actions in support of its sovereign shareholders as a quid pro quo for institutional and legal changes that gave the ECB greater confidence in the long-run commitment of euro-zone governments to fiscal discipline appear to have been misplaced,” it said.
Bundesbank President Jens Weidmann said that while the European accord to limit budget deficits represents “progress,” the onus is on governments rather than the ECB to resolve the crisis with financial backing, Frankfurter Allgemeine Sonntagszeitung reported yesterday.
--Editors: Fergal O’Brien, Louis Meixler
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