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.
Angela Merkel, Nicolas Sarkozy, photo: CTK
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.”
Photo: Štěpánka Budková
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.
