Europe has itself to blame, says PM
PRIME Minister Julia Gillard says the credit downgrade of European nations was the result of avoiding hard decisions.
PRIME Minister Julia Gillard says the credit downgrade of European nations was the result of avoiding hard decisions.Speaking after Standard & Poor's stripped France and Austria of their prized triple-A ratings and downgraded Italy, Portugal, Spain, Cyprus, Malta, the Slovak Republic and Slovenia, Ms Gillard said the moves were the "price to be paid by national governments who have put off tough reforms"."For too many years, European governments have deferred the nation-building productivity-enhancing reforms which Australia has made the foundation of our dynamic and resilient economy," she said.Their leaders should "swiftly undertake structural reforms to boost their economic potential and lift growth".But leading Australian economist Shane Oliver, of the AMP, warned that swift action to repair European budget deficits could cut growth further."Fiscal austerity leads to economic deterioration and budget deficits blown out. It has the effect of worsening the economic outlook," he told The Age.Ms Gillard called on the leaders to "implement credible medium-term plans to put their budgets on a sustainable footing, because taxpayers rightly expect governments to manage their money prudently and global financial markets demand responsible fiscal management".Shadow treasurer Joe Hockey lambasted the Prime Minister for the intervention saying it was "a little rich" for the Prime Minister to lecture Europe."She and her treasurer have presided over a massive blowout in Australia's debt and turned strong budget surpluses into record deficits. Voters won't forget pink batts, cash for clunkers, Building the Education Revolution and $900 cheques to dead people," he said.The downgrades leave Germany the only major economy using the euro to maintain a triple-A rating. Portugal and Cyprus have had their ratings cut to so-called junk status.The decision endangers the triple-A rating used by the European Financial Stability Facility to borrow cheaply and lend to ailing euro zone members. France is the facility's second-biggest guarantor.The Australian dollar is close to an all-time high against the euro, buying 81.41 euro cents.