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Quoting the Crisis
25/01/2012
“ The upcoming [European Stability Mechanism] will however also face a difficult trade-off between higher lending volume and achieving a AAA rating. With no further increase to the current callable capital levels, the lending capacity of the ESM would decline by Eur200bn. To maintain the current lending capacity and its AAA, then member countries would need to double their level of callable capital into the ESM compared to current commitment. Should euro area policy makers want to double the lending capacity of the ESM from pre downgrade times (while maintaining its AAA), then the ESM would need a callable capital of almost 30% of euro area GDP! Discussions surrounding the potential increase in the size of the ESM in March will be more difficult post downgrade. „
(
Source:
ftalphaville.ft.com
)
Jacques Caillou, chief economist at RBS, quoted by Paul Murphy in FT Alphaville » RBS on those S&P downgrades
