Safe-haven credit ratings downgraded

Government bonds are getting riskier, not just in Greece, but also in "supposed havens", such as Germany, says Gillian Tett in the FT. Analyst Josh Rosner predicts German bond yields could soon rise as investors wake up to the costs of a eurozone bail-out.

Credit-rating agency Moody's this week changed its outlook for Germany, the Netherlands and Luxembourg, all AAA-rated, to negative. That's because of the increased likelihood of a Greek euro exit and the cost of extra support needed for Spain and Italy. France and Austria, also triple A-rated by Moody's, have been on negative outlooks since February.

Germany's finance ministry insists that the "very sound state of Germany's own economy and public finances remains unchanged". However, Markit's latest eurozone purchasing managers' index survey reveals that the downturn has pushed unemployment to its highest level for two and a half years and that Germany is not immune. "Germany is now contracting at the steepest rate for three years, while the rate of decline in the periphery is also among the highest seen since mid-2009," says Chris Williamson, chief economist at Markit.

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Paul Donovan at UBS believes a series of actual sovereign downgrades are on the way. "If the euro survives (and we think that it will) there has to be a burden sharing that implies a lower credit quality for most of the high-rated states," he says. Yet if the euro does not survive, then the ensuing chaos means that no country should expect to "keep an AAA rating".