S&P warns of socially explosive situation in Europe

Global ratings agency Standard and Poor's today warned of a high risk of Spain, Italy, Portugal and France failing to carry through necessary reforms as the unemployed became less willing to put up with austerity.

The Neue Osnabrücker Zeitung quoted S&P's Germany head Torsten Hinrichs as saying that the high unemployment in Spain, Italy and France was socially explosive and there had to be a social consensus for saving measures.

Hinrichs added the high unemployment in these countries did not help the reforms process.

According to Hinrichs, the people of Spain and Portugal had already proved they were willing to bear with austerity measures, but this could not continue forever".

He warned that in Italy there was the further danger that a new government might not be strong enough for the still necessary reforms to strengthen growth.

Hinrichs also said S&P still rated Germany as a triple A with stable outlook and did not see any reason for concern, adding that it was one of the few AAA and stable countries that in Europe.

He added, the weak profitability of the banking sector due to the abundance of banks..

Though this was the the only problem in Germany, he said there were signs of positive changes in the sector in terms of equity capital and refinancing.