Eurozone countries face no risk of “contagion” from the debt and deficit crises afflicting Greece, Portugal and Spain, the chairman of a ratings agency said yesterday.
Fitch Ratings chief Marc Ladreit de Lacharriere told Europe 1 radio that while the state of public finance in the three countries was “worrying ... there is really no contagion” in other members of the 16-nation euro currency bloc.
Eurozone powerhouses France and Germany enjoy sufficient “credibility” with investors “who are the deciders and the masters of the game.”
“In France and Germany we are lucky in having two pilots on board,” he said.
Fitch, Moody’s and Standard and Poor’s are the leading international agencies that assess the credit-worthiness of government and company debt.
Eurozone financial markets were roiled in December when all three agencies downgraded Greece’s sovereign debt, voicing doubts that Greek authorities would be able to curb public spending.
“Is Greece capable of taking steps to improve the situation?” Ladreit de Lacharriere asked.
“There are doubts because Greece has never really followed directives coming from Europe. They have not respected the [EU] monetary and economic stability pacts,” he said.
In the face of evidence that the financial crisis still plagues Greece, Portugal and Spain, Ladreit de Lacharriere said economic stimulus measures should remain in place.
“It is crucial that stimulus plans be maintained because projected growth rates for 2010 remain very weak,” he said.
Meanwhile, CIMB Investment Bank said Asia was “relatively risk free” from the contagion because its economies had stronger fiscal positions.
Asian governments mainly use domestic markets to fund their deficits and debt levels are still manageable and within sustainable limits, CIMB economists, led by Lee Heng Guie, wrote in a report yesterday.
The recent rise in Asian credit-default swaps is temporary, the analysts from Malaysia’s second-largest banking group said.
Investor concern that Greece, Portugal and Spain are facing difficulty financing budget deficits pushed credit-default swaps on the debt of all three countries to record highs last week.
“Fears of sovereign-debt contagion spreading to Asia are buffered by Asia’s strong economic and financial fundamentals,” CIMB said.
“Given Asia’s well-managed financial prudence, as well as sound macroeconomic management, we do not expect international rating agencies to flash their concerns on potential sovereign debt risk in the region,” it said.
The sovereign debt ratings of countries in the Asia-Pacific region are unlikely to be cut this year as rebounding global demand for exports and fiscal stimulus spur domestic growth, Moody’s said in a report last month.
The region’s “robust” growth potential means most countries, excluding Japan, have begun or will start winding down expansionary monetary and fiscal policies, it said.
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