by Michael Smith (Veshengro)
London,UK, January 2012 : Credit rating agency Standard & Poor's has downgraded the credit ratings of nine Euro-zone countries, stripping France and Austria of their coveted triple-A status. The status of EU paymaster Germany, however, remains untouched. This is a definite a Black Friday the 13th for the troubled single currency area.
S&P has cut the ratings of Italy, Spain, Portugal and Cyprus by two notches and the standings of France, Austria, Malta, Slovakia and Slovenia by one notch each.
Greece already, if I am not mistaken, has a credit rating of “junk”and are things really not looking well for the Euro now. One can but wonder whether it is not time to take the patient off life-support and allow him to die peacefully.
In another potentially and possibly more ominous setback even the negotiations on a debt swap by private creditors seen as crucial to avert a Greek default that would rock Europe and the world economy broke up without agreement in Athens, although officials said more talks are likely next week.
The truth is that if Greece cannot persuade banks and insurers to accept voluntary losses on their bond holdings, a second international rescue package for the euro zone's most heavily indebted state will unravel, raising the prospect of bankruptcy in late March, when it has to redeem 14.4 billion euros in maturing debt.
The move by S&P has put highly indebted Italy on the same BBB+ level as Kazakhstan and pushes Portugal into junk status.
The credit rating agency has put 14 Euro-zone states on negative outlook for a possible further downgrade, including France, Austria, and still triple-A-rated Finland, the Netherlands and Luxembourg. Germany was the only Euro-country to emerge totally unscathed with its triple-A rating and a stable outlook.
The French finance minister downplayed the downgrade of Europe's second-biggest economy from AAA to AA+ for the first time since 1975 saying that it was far from a catastrophe and claiming that it is an excellent rating.
It would appear that it is business as usual in the make-believe department all over the Euro-zone and no one has the guts too admit that the single currency is in more than serious trouble.
But then, make-believe at this very time the favorite past-time of the governments as they are trying to have the people believe that everything is fine and rosy and that everything is going to be back to normal in a jiffy.
As I keep saying, I have bad news. It is not going to be all well in the end very soon. Far from it and the sooner people – the governments know and are in denial – realize it the better.
© 2012
