Tuesday, October 11, 2011
David Riley, head of global sovereign ratings at Fitch Ratings, said the situation in Europe had become "systemic".
"The eurozone crisis keeps on getting worse," he said on Jeff Randall Live.
"It's now become a systemic crisis - not just in terms of spreading the contagion to Italy, which is deeply worrying - but it's now become a systemic banking crisis."
His comments follow Fitch's downgrade of both Spanish and Italian government debt on Friday.
But Mr Riley stressed there was "broad recognition" of what needs to be done to help the region.
He said the solution includes dealing with Greece's debt, putting more money into banks and supporting weaker countries like Spain and Italy, which he described as "solvent but potentially illiquid".
Fitch Ratings downgraded both Italy's and Spain's government debt on Friday
But when pressed by Randall on whether Germany would bankroll these measures, he admitted this was a problem.
"It's not that they don't know the potential solution, it's that they don't want to put that one in place," he said.
"That's one of the reasons why they've been behind the market, because where the market is wanting to take them... Germany in particular doesn't want to go there."
He added:"(Prime Minister) David Cameron said they have weeks to do it, but I think this crisis could go on for months, not weeks."
EU leaders have postponed a key meeting on resolving the region's debt problems.
European Council President Herman Van Rompuy said the meeting planned for October 17 would now take place the following week to enable leaders to finalise their strategy.
But within hours of the announcement, Chancellor George Osborne urged for a fast decision on the plan for the eurozone.
"We need a comprehensive solution that puts our largest trading market on a much more stable footing," he said in the House of Commons.
The Chancellor's comments follow assurances by German Chancellor Angela Merkel and French President Nicolas Sarkozy at the weekend that they had agreed on a "long-lasting, complete package" to counter the eurozone's debt crisis.
Following discussions in Berlin, the pair also said they are ready to recapitalise the region's banks, but failed to reveal any details.
Officials in Berlin told The Telegraph it is "more likely than not" that investors will suffer fresh losses on holdings of Greek debt, beyond the 21pc haircut agreed in July.
The exact level will depend on findings by the EU-IMF "Troika" in Athens.
"A lot has happened since July. Greece has fallen back on its commitments, so we have to assume that the 21pc cut is no longer enough," said one source.
Finance minister Wolfgang Schäuble told the Frankfurter Allgemeine that the original haircuts were "probably" too low, saying banks must have "sufficient capital" to cover greater losses if need be. Estimates near 60pc have been circulating in Berlin.
The shift in German policy has ominous echoes of last year when Chancellor Angela Merkel first called for bondholder haircuts, setting off investor flight from Ireland and a fresh spasm in the EU debt crisis.
Israeli officials have reportedly warned Syrian dictator Bashar Assad that if he uses the downfall of his regime as an excuse to launch missiles at Tel Aviv, Israel will respond with a massive assault against Syria, Lebanon and Gaza.
Unnamed Israeli government sources told News First Class that the threat was relayed to Assad via European intelligence agencies.
The Israeli counter-threat came just days after Iran's Fars news agency quoted Assad telling Turkey's foreign minister that he would launch hundreds of ballistic missiles at Tel Aviv if the West interferes in his violent crackdown on pro-democracy protestors in Syria.
"If a crazy measure is taken against Damascus, I will need not more than six hours to transfer hundreds of rockets and missiles to the Golan Heights to fire them at Tel Aviv," Assad reportedly said.
Israel's threat included Lebanon and Gaza because Assad is said to have boasted that his own missile barrage on Tel Aviv would be complemented by Hizballah and Hamas attacks on Israel.
Were that scenario to play out, Assad is also reportedly confident that Iran would launch an attack on US warships in the Persian Gulf.
While the situation is wholly out of Israel's hands, there is concern in the Jewish state over what Assad may interpret as Western interference.
Israeli commentators have already stressed that if Assad feels he is going to be toppled, he will have nothing to lose by launching a last minute attack on Israel. In fact, by doing so he has much to gain, as a missile assault on Tel Aviv would solidify Assad's legacy as a dedicated enemy of the hated "Zionist entity."