To each one its debt and crisis for everyone
- Moody’s downgrades Italy
- Unsustainable spreads in the euro zone
- National debts need to make common cause
Since the beginning of the crisis, it is often the countries that have made the biggest efforts to resolve budget imbalances or restore external accounts that are most often downgraded by the rating agencies. They are also the ones that have seen a surge in yield spreads with Germany (chart). The belated sanctioning of past errors does not do justice to current improvements and prevents them from bearing fruit. Moody's has just lowered its sovereign rating for Italy by two notches to Baa2, even though the country has launched numerous structural reforms and has a hefty primary surplus (which the Commission estimates at more than 3 points of GDP in 2012). As necessary as it may be, fiscal discipline is not credible in places where the markets esteem, rightly or wrongly, that the debt burden is too heavy to be borne by the government alone. It is vital to reduce yield spreads, but this requires collective action, which means either transfers or at least the partial mutualisation of debt. This is the only way to avoid destructive internal hedging within EMU, and to benefit from fundamentals which are nothing to be ashamed of, much to the contrary, compared to those of the advanced countries whose currency is not the euro.