Standard & Poor's fuelled fears of a crippling economic crisis in Europe on Monday, issuing a dire warning of an unprecedented mass downgrade of eurozone countries’ credit ratings if EU leaders fail to deliver a fast and efficient solution to the region's debt crisis. Although France and Germany promptly threw their weight behind a reform plan which would reinforce governance within the alliance, scepticism remains high and even non-eurozone members such as the Czech Republic are bracing for the worst.
The gravity of the situation was clearly apparent on Monday as German Chancellor Angela Merkel and French President Nikolas Sarkozy rallied behind a last ditch attempt to restore confidence in the battered eurozone. The solution presented is tighter financial governance within the alliance which would prevent other member states defaulting; a plan which would require fundamental changes to the Lisbon Treaty. President Sarkozy said on Monday broad support for the reforms would be welcome.
“Our preference is for a treaty with all 27 members so that no one feels left out. But if that is not possible we are ready to seek endorsement by the euro-zone’s 17 members alone.”
The Czech government’s EU secretary Viktor Belling said that while not a eurozone member –the Czech Republic was not ruling out support for a proposed change to the treaty.
“At this point we are not opposed to proposals for change as such. There are no a priori taboos in this respect.”
However confidence in the eurozone’s ability to ride out the storm is clearly low and the government’s economic council is bracing for the impact of a severe recession on the export-dependent Czech economy– including the possible collapse of the eurozone and a subsequent credit crunch. The government’s economic advisory board has drafted 4 crisis scenarios with over 30 emergency measures which would see the country through bad-to-disastrous times. They include enforcing a balanced budget by law, introducing a unified 20 percent VAT or a three day working week. Fearing what the future may bring, Czechs have started saving their money big-time.