Europe Credit Watch: S&P Downgrades 9 EuroZone Countries
As expected, and considered inevitable, Standard & Poor’s Ratings Services downgraded 9 European
Economic and Monetary Union (EMU or EuroZone) countries on Friday, January 13, 2012. Actions, mostly negative, were taken on 16 countries. Of these, 14 countries now have a negative outlook, which means “there is at least a one-in-three chance that the rating will be lowered in 2012 or 2013″. The 9 countries downgraded:
1 Austria from AAA to AA+ (lowered 1 level); now negative outlook
2 Cyprus from BBB to BB+ (lowered 2 levels); now negative outlook
3 France from AAA to AA+ (lowered 1 level); now negative outlook
4 Italy from A to BBB+ (lowered 2 levels); now negative outlook
5 Malta from A to A- (lowered 1 level); now negative outlook
6 Portugal from BBB- to BB (lowered 2 levels); now negative outlook
7 Slovakia from A+ to A (lowered 1 level); now stable outlook
8 Slovenia from AA- to A+ (lowered 1 level); now negative outlook
9 Spain from AA- to A (lowered 2 levels); now negative outlook
Additional actions taken by S&P:
1 Belgium continues AA, now negative outlook
2 Estonia continues AA-, now negative outlook
3 Finland continues AAA, now negative outlook
4 Germany continues AAA, now stable outlook
5 Ireland continues BBB+, now negative outlook
6 Luxembourg continues AAA, now negative outlook
7 Netherlands continues AAA, now negative outlook
European Downside Risks S&P stated “the main downside risks that could affect eurozone sovereigns to various degrees are related to:
(1) the possibility of further significant fiscal deterioration as a consequence of a more recessionary macroeconomic environment and/or
(2) vulnerabilities to further intensification and broadening of risk aversion among investors, jeopardizing funding access at sustainable rates.
(3) Furthermore, we believe that there is a risk that reform fatigue could be mounting, especially in hose countries that have experienced deep recessions and where growth prospects remain bleak, which could eventually lead us to the view that lower levels of predictability exist in policy orientation, and thus to a further downward adjustment of our political score.”
Insufficient Policy Initiatives S&P states their “rating actions are primarily driven by our assessment that the policy initiatives that have been taken by European policymakers in recent weeks may be insufficient to fully address ongoing systemic stresses in the eurozone. In our view, these stresses include:
(1) tightening credit conditions
(2) an increase in risk premiums for a widening group of eurozone issuers
(3) a simultaneous attempt to delever by governments and households
(4) weakening economic growth prospects
(5) an open and prolonged dispute among European policymakers over the proper approach to address challenges.
The outcomes from the EU summit on Dec. 9, 2011, and subsequent statements from policymakers, lead us to believe that the agreement reached has not produced a breakthrough of sufficient size and scope to fully address the eurozone’s financial problems.”
Other European Countries Cyprus (BB+) and Portugal (BB) are now below investment grade (have “significant speculative characteristics”) and join Greece (CC, negative outlook) and others in junk status. Some other European and periphery countries ratings and outlook status:
Belgium AA, Watch Negative
Bosnia and Herzegovina B, Watch Negative
Bulgaria BB, Stable
Croatia BBB-, Negative
Czech Republic AA, Stable
Denmark AAA, Stable
Estonia AA-, Watch Negative
Hungary BB+, Negative Outlook
Iceland BBB-, Stable
Latvia BB+, Positive
Liechtenstein AAA, Stable
Lithuania BBB, Stable
Macedonia BB, Stable
Montenegro BB, Negative
Norway AAA, Stable
Poland A, Stable
Romania BB+, Stable
Russia BBB+, Stable
Serbia BB, Stable
Sweden AAA, Stable
Switzerland AAA, Stable
United Kingdom AAA, Stable
S & P Downgrades, U.S. Dollar, Debt, Trade, The Fed (The Schiff Report January 14, 2012) We knew Peter Schiff, one of our favorite economic doomsayers and one of the most lively bears, would weigh in on the S&P European downgrades and other issues today. Here’s his view on the EuroZone debt, but mostly on the USA debt and economy.
http://youtu.be/5EYVss0i83s
