(Reuters) - Standard & Poor's warned on Wednesday that credit ratings in the euro zone could come under renewed pressure if large parts of the currency bloc slip back into recession, as expected, next year.
David Beers, the man behind S&P's downgrade of the United States, also said on Wednesday he expected the European Central Bank (ECB) and euro zone governments to come to some sort of accommodation on how to resolve the spiraling sovereign debt crisis.
With so much at stake, one would expect that some accommodation can be found between euro zone monetary authorities and national policy makers that balances substantive government policy actions with more aggressive steps by the ECB to counter a renewed economic downturn, Beers, the global head of sovereign ratings at S&P, said in a speech in Dublin.
Such steps of course would entail closer policy coordination and a redoubled political commitment at the euro group and EU levels.
But he warned that recession in large parts of the euro zone may be difficult to avoid if yields on sovereign bonds remain elevated and bank balance sheets continue to contract.
The financial dynamics unleashed by the ongoing confidence crisis, in Standard & Poor's view, have heighted the risk of renewed recession in a growing number of euro zone members that potentially could put additional downward pressure on (the) euro area's sovereign ratings.