Y’S moved the EU’s triple-A credit onto a negative outlook last night, based on similar downgrades to key constituent members, as Eurozone figures continued to battle over measures to resolve the euro area’s sovereign debt crisis.
Moody’s said it placed the EU on a negative outlook after doing the same to the UK, Netherlands, France and Germany, who pay in 45 per cent of the bloc’s budget.
This came as Mario Draghi, president of the European Central Bank (ECB), claimed that it would not breach EU law if the ECB bought member state bonds.
“If we are in the short term part of the market where bonds have a length of time maturity of up to one year, two years or even three years, these bonds will easily expire,” Draghi told the Economic and Monetary Affairs Committee of the European Parliament.
“So there is very little monetary financing effect at all in what we are doing,” he said, going on to argue that the Bank’s mandate to maintain price stability could justify bond-buying.
Committee boss Olli Rehn also made the case for interventionism in the meeting. “Our approach…envisages an ambitious mechanism with a relatively broad coverage, which will oversee all banks in the euro area, with the ECB at the heart of the system,” Rehn said.
But Germany opposes such a wide remit for the Bank, with finance minister Wolfgang Schäuble arguing that only the systemically most important banks should be monitored.