The shock decision to slash the outlook of Germany, Europe’s top economy and paymaster, from “stable” to “negative” came as auditors arrived in debt-wracked Greece and Spain’s top finance official headed to Berlin for talks.

The news pushed Spain’s borrowing costs above 7.5 percent – well above the seven-percent mark that forced others into bailouts – but European stocks rebounded slightly as positive Chinese data offset the Moody’s bombshell.

Moody’s said its decision was based on “rising uncertainty regarding the outcome of the euro area debt crisis (and the) … increased likelihood of Greece’s exit from the euro area.”

Even if Greece manages to stay in the 17-member bloc, Moody’s said there was “an increasing likelihood that greater collective support for other euro area sovereigns, most notably Spain and Italy, will be required.”

Germany’s top rating could be cut, Moody’s said, if Berlin needed to shore up its banks as a result of the crisis, if the bloc were to split or Germany were to see its own borrowing costs – currently at record lows – rise.

Policymakers raced to dismiss the action.

The head of the Eurogroup of eurozone finance ministers, Jean-Claude Juncker, immediately stressed a “strong commitment” to the bloc’s stability after the warning, which also hit the Netherlands and his native Luxembourg.

Moody’s latest decision “confirms the very strong rating enjoyed by a number of euro area member states, as supported by the sound fundamentals which these (three) and other euro area countries continue to enjoy,” said Juncker.

Germany’s finance ministry was even more dismissive, saying in a statement issued late Monday: “The eurozone risks that Moody’s mentions are not new.

“Moody’s assessment is derived mainly from short-term risks, while the longer-term outlook for stabilisation goes unmentioned … The very sound state of Germany’s own economy and public finances remains unchanged,” it said.

Berlin would maintain its “safe haven status” and continue to act as a “stability anchor in the euro area,” the finance ministry vowed.

But in another sign that Germany’s resistance to the eurozone turbulence was fading, a key business confidence index slipped to a three-year low, prompting analysts to warn the German economy could deliver below-trend growth.

In Athens, auditors from the International Monetary Fund, European Central Bank were arriving to review Greek progress towards securing a further slice of bailout cash before the country goes bankrupt.

Officials in Germany have insisted they will wait for this report, due in early September, before casting judgement on Greece’s ability to stay in the eurozone as voices in Berlin calling for their exit grow louder.

Meanwhile, political efforts to contain the crisis were set to intensify, with Spanish Economy Minister Luis de Guindos due in Berlin for talks with German Finance Minister Wolfgang Schäuble.

Berlin has insisted it is a “regular meeting” but spokeswoman Marianne Kothe acknowledged on Monday: “They will of course discuss the current situation in Spain” amid speculation Madrid will soon be forced into a full-blown bailout.

The meeting takes place behind closed doors and no news conference was expected following the meeting.

De Guindos insisted Monday that there was no possibility of a sovereign bailout after Spain clinched a rescue package last week of up to €100 billion for its stricken banks.

But Spain’s troubles showed little sign of abating Tuesday as it paid higher rates to borrow for three and six months, although demand was stronger than at a previous such auction.

While markets broadly took the Moody’s action in their stride, some analysts saw implications for Chancellor Angela Merkel’s crisis-fighting strategy.

“Opposition to additional commitments for rescue measures is likely to strengthen,” said Christian Schulz from Berenberg Bank, noting Merkel has had to rely on opposition support in parliament to push through key measures.

“Even more German reluctance to help will further erode the confidence of investors and savers in southern Europe,” Schulz warned.

AFP/jcw