Credit Watch on the Rhine

Said Moody's: "In pondering whether
We ought to rate Germany nether,
We considered the cost
If the euro is lost,
As well as to hold it together."

"In view of Berlin's liability
To backstop the euro's fragility,
We regard it as likely
Madrid really might be
Too much for their funding ability."

Moody's Investors Service has announced that it sees a negative outlook for its Aaa credit rating of Germany. Though the nation remains one of the strongest in Europe, its vast liability for potential bailouts of Spain and Italy, as well as the exposure of its banks to euro zone's weaker economies, would make for a severe test of Germany's financial resources. With negative outlooks also placed on the Netherlands and Luxembourg, this leaves only Finland - which has fewer foreign financial entanglements - as a solid triple-A, according to Moody's (S&P and Fitch have made no such changes). The critical issue now is to maintain the ability of the Spanish government to finance its deficits, without which a fresh round of public (primarily German) support will be required.