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Economy

And Why Not Germany? Ratings Downgrades Leave Europe More Divided Than Ever

Analysis: A French look at the euro zone's prospects after Standard and Poor’s (S&P) downgraded the public debt of half of the euro zone. Not only did France lose equal partnership with Germany, Italy risks sinking further into crisis. Bu

European Central Bank, Frankfurt (DuckyDebs)
European Central Bank, Frankfurt (DuckyDebs)
Catherine Chatignoux

BRUSSELS - Standard and Poor's downgrading of France's rating, and that of eight of its European neighbors, is the latest cold blow for the euro zone. During the "black Friday" announcement, S&P took aim at Austria, which like France lost its triple A rating, as well as Malta, Slovakia and Slovenia which were each downgraded by one notch, while Italy, Spain, Portugal and Cyprus' ratings were each cut by two notches. In addition, 14 of the 17 euro-zone countries were given a negative outlook, meaning that they are are likely to be downgraded within a year.

S&P could have downgraded the whole euro zone as a block. But by choosing to deal with each country separately, it has created a risk of increased political and financial tensions across the entire currency zone.

The market implications are "worse than a downgrade for the entire euro zone, because of the likely political disagreements, debates about the amount of the financial firewall and investor anxiety," says one analyst at the Royal Bank of Scotland (RSB). The S&P's decision, however, was primarily motivated by the "insufficiency" of European leader's response to the crisis in the past few weeks, most notably during the European summit that took place on December 9.

Moritz Krämer, S&P's European director, explained that beyond the weak response, there was also an incomplete evaluation of the causes of the crisis. "The political environment around the euro does not stand up to the challenges of the crisis," he said.

Germans get off easy

But Germany, which escaped even a warning from S&P, is at least as responsible for the euro zone's response to the financial crisis as the other euro countries. In fact, considering Germany's role as a leader in the euro zone, it is probably even more responsible for Europe's response to the crisis than its neighbors. Yet Germany was the only euro-zone country to maintain both a triple A rating and a stable outlook.

For many, both within European institutions and inside Nicolas Sarkozy's entourage, the setback inflicted on euro-zone countries by S&P confirms a continuing lack of understanding regarding the euro zone's work. "Germany is the big winner in this exercise, and will see its negotiation power reinforced," the RBS said. Thierry Breton, the former French minister of the economy, put it bluntly: "Berlin is alone in the cockpit."

The first consequence of the "decoupling" in status of Berlin and Paris, is that France, which already was having trouble convincing Germany to increase its commitment to the euro-zone rescue, will now find itself with even fewer cards in hand. If, as is emerging, the rating of the European Stability Fund is based largely on France and Austria's rating, then the euro zone will be left with only two choices: either Europeans will have to accept a reduction in the Stability Fund's capacity (which is currently around 170 million euros, according to the RBS), or the four euro-zone countries that still have a triple A rating will have to increase their guarantees.

Based on Angela Merkel's comments on Saturday, the later scenario seems unlikely. Yet that firewall is, at the moment, the only barrier against a crisis contagion in Italy, which, according to Moritz Krämer, is going to have to find 130 billion euros between now and April, and 300 billion euros by the end of 2012.

In addition, Berlin will now be able to use its rating to continue to impose a purely "budgetary" response to the crisis on all of its partners. This past weekend, Angela Merkel requested that the budgetary pact that is currently being negotiated be implemented quickly. "It's not about trying to mitigate the crisis everywhere one can, it is about giving solid financial guarantees for the future," she said.

Read the original article in French

Photo - DuckyDebs

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Coronavirus

Chinese Students' "Absurd" Protest Against COVID Lockdowns: Public Crawling

While street demonstrations have spread in China to protest the strict Zero-COVID regulations, some Chinese university students have taken up public acts of crawling to show what extended harsh lockdowns are doing to their mental state.

​Screenshot of a video showing Chinese students crawling on a soccer pitch

Screenshot of a video showing Chinese students crawling

Shuyue Chen

Since last Friday, the world has watched a wave of street protests have taken place across China as frustration against extended lockdowns reached a boiling point. But even before protesters took to the streets, Chinese university students had begun a public demonstration that challenges and shames the state's zero-COVID rules in a different way: public displays of crawling, as a kind of absurdist expression of their repressed anger under three years of strict pandemic control.

Xin’s heart was beating fast as her knees reached the ground. It was her first time joining the strange scene at the university sports field, so she put on her hat and face mask to cover her identity.

Kneeling down, with her forearms supporting her body from the ground, Xin started crawling with three other girls as a group, within a larger demonstration of other small groups. As they crawled on, she felt the sense of fear and embarrassment start to disappear. It was replaced by a liberating sense of joy, which had been absent in her life as a university student in lockdown for so long.

Yes, crawling in public has become a popular activity among Chinese university students recently. There have been posters and videos of "volunteer crawling" across universities in China. At first, it was for the sake of "fun." Xin, like many who participated, thought it was a "cult-like ritual" in the beginning, but she changed her mind. "You don't care about anything when crawling, not thinking about the reason why, what the consequences are. You just enjoy it."

The reality out there for Chinese university students has been grim. For Xin, her university started daily COVID-19 testing in November, and deliveries, including food, are banned. Apart from the school gate, all exits have been padlock sealed.

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