Nowotny Says S&P Favors Fed’s Bond Buying Over ECB’s Policy
January 17, 2012, 1:51 AM ESTBy Boris Groendahl and Zoe Schneeweiss
Jan. 16 (Bloomberg) -- European Central Bank Governing Council member Ewald Nowotny said Standard & Poor’s downgrades of euro members was based on the ratings company’s favoring the Federal Reserve’s policy of buying government bonds over the ECB’s “restrictive” policy.
S&P has “general doubts regarding our strategy of combining consolidation measures with the very restrictive policy of the ECB,” Nowotny said in a panel discussion broadcast live on Austrian state television yesterday. “Their model is the American or the English one, where the central bank itself massively buys bonds,” he said, adding that “this is a fundamental political discussion, which one has to lead.”
The rating company on Jan. 13 lowered the top ratings of France and Austria one level to AA+, with “negative” outlooks, while affirming the ratings of countries that included Germany, Belgium and the Netherlands. The company also downgraded Italy, Portugal, Spain and Cyprus by two steps and cut Malta, Slovakia and Slovenia by one level.
S&P analysts, outlining the decision to downgrade the sovereign credit ratings of nine of the euro area’s 17 members, said the challenges posed by the crisis were rising.
“The explanation of S&P is fundamentally a political one -- they are unhappy with the developments in Europe,” said Nowotny, who also heads Austria’s central bank. “Frankly there are a lot of reasons to be unhappy, things are going too slowly.”
--Editor: Zoe Schneeweiss
To contact the reporters on this story: Boris Groendahl in Vienna at bgroendahl@bloomberg.net; Zoe Schneeweiss in Vienna at zschneeweiss@bloomberg.net
To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net
