Moody's has sent a "warning signal" to Europe with its downgrade of Germany's outlook to negative, a New Zealand Professor of Economics says.
Germany's prized Aaa credit rating was yesterday lowered to negative by Moody's, with the ratings agency citing "rising uncertainty" about Europe's debt crisis.
Highlighting Germany's predicament in the region as one of the strong economies carrying weight of the debt crisis, Moody's indicated Spain and Italy could still drag the nation deeper into the crisis.
Christoph Schumacher, a Professor of Economics at Massey University, told TV ONE's Breakfast that Moody's is sending a clear signal.
"First of all it's a warning signal, I believe, for the euro zone," he said.
"Germany hasn't lost its Aaa rating but Moody's has sent a clear signal that if things don't improve, we will consider a downgrade - and that would be the real problem.
"Certainly Moody's has indicated they believe Greece might leave the euro zone, and Spain might need a massive bailout - that what they've been given now is not enough, and we see indications of that."
And as Germany would help foot the bill for a potential bailout and Greek exit, it is becoming increasingly clear there is little political support for German Chancellor Angela Merkel to give any more aid to Greece than has already been promised.
"I think the mood in Germany is changing. People - or taxpayers - are getting tired of paying the bill for other countries that haven't been as careful with spending as Germany has, for example."
According to Schumacher, Spain is next in line for a bailout.
"With the deficit that Spain has, the slowdown of the economy, now Spain can't even sell its debt - I believe a bailout will be necessary in order to save Spain."
He said yesterday the markets showed an initial shock to the news, but flattened out because Germany is still hanging on to its Aaa rating.