S&P defends massive European downgrade

By Angela Charlton ,AP

PARIS — Amid a wave of criticism, Standard & Poor’s defended its decision to downgrade nine European countries and insisted Saturday that the region’s leaders aren’t doing enough to solve their debt crises. The prime minister of France, the biggest economy hit by the downgrade, vowed to press ahead with cost-cutting measures that opponents say will suffocate growth. The loss of its coveted AAA status wounded France’s self-image and market credibility just as it’s facing a new recession and presidential elections. The move Friday night may make it more expensive for struggling countries to borrow money, reduce debts and sustain growth. It also came just as crucial negotiations between the Greek government and its private creditors appeared close to collapse. Voices rose up Saturday against the power that ratings agencies wield. Critics of S&P have questioned its credibility and relevance before because it failed to foresee the collapse in the U.S. subprime mortgage market, which helped trigger the financial meltdown of 2008. In Romania on Saturday, residents staged a third day of protests against the government over cost-cutting and falling living standards. In Paris, demonstrators chanted in front of the S&P French offices and castigated the government for paying so much heed to the ratings agencies. “The French people know what their value is and we don’t need ratings agencies to tell us what we are worth,” said Raquel Garrigo, spokesman for the Left Front political party.

Exasperated Responses from Officials Cyprus President Dimitris Christofias called the downgrade “unacceptable.” “The latest downgrade is completely unfair and loaded with ulterior motives,” he told reporters. “Just when the Cyprus economy is breathing easier and showing signs of emerging from the crisis, and when our financing needs for 2012 and perhaps beyond 2012, have been covered, a (credit ratings) agency comes along to downgrade.” Austria’s chancellor criticized S&P’s decision to strip his country of its AAA rating, and noted that his coalition government is working on an austerity package. Werner Faymann wrote on his Facebook page that the decision showed “that Austria must become more independent from the financial markets.” In Germany, whose AAA rating remained untouched, a senior lawmaker with Merkel’s conservative party, Michael Meister, suggested action to reduce the significance of ratings. Merkel signaled her support. Germany’s foreign minister called for independent European ratings agencies instead of relying solely on the leading, U.S.-based agencies such as Standard & Poor’s. And Vice Chancellor Philipp Roesler, who is also the economy minister, was quoted as telling the weekly Der Spiegel, “It is apparent time and again that U.S. rating agencies pursue very much their own goals. It’s unclear though whether a European agency would come to different conclusions or reduce what critics see as a disproportionate influence that ratings agencies have on markets and policymakers.