European Leaders Confer on U.S. Downgrade

By AINSLEY THOMSON, WILLIAM HOROBIN and CHRISTOPHER EMSDEN

LONDON—European officials offered support for the U.S. after the first downgrade in its credit rating, but also launched into a round of telephone conferencing to discuss implications for Europe's own credit crisis.

The Italian government said Saturday it backs proposals under discussion to call a special meeting of finance ministers from the Group of Seven major world economies.

"Italy is in favor of a proposal like that," said Paolo Bonaiuti, spokesman for Prime Minister Silvio Berlusconi. A proposal is "circulating" among G-7 countries, but no decision has been taken, he said.

Global financial tensions escalated late Friday with the decision by the Standard & Poor's credit-ratings agency to cut the U.S. government debt rating to AA+ from AAA with a negative outlook, the first time in modern history.

The shockwave holds implications for Europe's own government debt crisis, which so far has crippled Greece, Ireland and Portugal after their borrowing costs became unsustainable.

Without a strong U.S. economy and finances, odds are against Europe generating enough economic growth to cut deficits and debt. Recent worries about Italy and Spain falling into the same debt trap have sparked calls for more international coordination at the European and G-7 level.

U.K. Chancellor of the Exchequer George Osborne Saturday was planning a phone conversation with Polish Finance Minister Jacek Rostowski, who currently chairs the European Union finance ministers' meetings, to discuss threats to global financial stability.

A U.K. Treasury spokesman said the U.S. downgrade illustrates why Britain cannot abandon its deficit-reduction plan.

In May 2009, S&P put the previous Labour government on the defensive by placing the U.K.'s AAA credit rating on negative outlook for the first time in history. However, in October last year the rating agency reversed that call.

French Finance Minister Francois Baroin, speaking on French radio station RTL, said he has been in contact with all other G-7 members in recent days and also Saturday morning. He didn't give details of the talks or suggest that a meeting was imminent.

The G-7 is made up of the U.S., Japan, Germany, France, Italy, Canada and the U.K.

Mr. Baroin offered moral support for his U.S. counterpart, Treasury Secretary Timothy Geithner and the U.S. administration's contention that the S&P's findings were flawed.

"We can ask ourselves why Standard & Poor's has taken this decision on the basis of nonconsensual figures that I'm sure the American treasury will comment on," Mr. Baroin said.

"We have a total confidence in the solidity of the American economy and its fundamentals," Mr. Baroin said, noting last week's new U.S. debt agreement. "This confidence is in no way interrupted by the move from this rating agency."

German Chancellor Angela Merkel has been telephoning with President Barack Obama and French President Nicolas Sarkozy, but so far has resisted calls from political opponents in Berlin to return and take charge.

Dutch Finance Minister Jan Kees de Jager in a statement Saturday also expressed confidence in the U.S. economy and praised U.S. efforts to cut spending.

"But a quick and thorough implementation of the proposed fiscal reforms is essential," he said.

—Maarten van Tartwijk contributed to this article

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