Today, Germany continued to deny reports of a plan to float bonds together with other AAA rated euro countries and use the proceeds to provide assistance to struggling euro members like Italy and Spain.
The IMF also denied reports it was planning a 600 billion euro bailout for Italy. Moody’s, the credit rating agency, warned the credit worthiness of all eurozone governments are threatened by the “rapid escalation” of Europe’s financial crisis. Even AAA rated countries are not safe from ratings downgrades anymore.
The markets continue to rally however despite the denials. The global market is being propped up today by good news from holiday sales in the U.S. Now investors are hoping since the crisis in Europe is becoming so bad, this will force European leaders to act.
Many believe the best way to fix the crisis is with eurobonds, but Germany has continued to strongly refuse this because it would expose their tax payers to the bad debt from the weaker countries. Germany already funds most of the bailouts as it is anyways.
Economists think that the idea of ‘elite bonds’ may help ease some of Germany’s concerns, but the German Finance Minister denied reports that they will go along with this.
Moody’s added on Monday the euro zone “is approaching a junction, leading either to closer integration or greater fragmentation.” Last week they cut Hungary’s rating to junk status and said more countries could receive downgrades if the debt crisis continues.