By Art Patnaude
LONDON--Moody's Investors Service on Wednesday said a swift
return to strong economic growth is critical to the viability of
the euro area.
"If we see an ongoing recession, that's a significant threat to
the viability of the euro area," said Dietmar Hornung, senior
credit officer at Moody's, while speaking in London at the offices
of French lender Natixis.
Hornung said achieving solid growth levels, especially in Italy
and Spain, would need happen in a medium-term time frame of about
two years.
Moody's rates Italy and Spain in investment-grade territory,
although their current ratings are a large part due to the
backstops provided from the European Central Bank and the two
sovereign bailout funds, Hornung said. While those backstops are
big enough to aid smaller countries--such as Greece, Ireland and
Portugal--they would be insufficient to cover larger economies.
"Europe is living on borrowed time," he said. "If Italy gets
into serious trouble, then the EU is in serious trouble. You can't
take Italy out of the market for three years."