Five European Nations to Be Downgraded by S&P: Report
Standard & Poor's is expected to cut the credit ratings of Italy, Spain and Portugal by two notches and downgrade France and Austria by one notch, according to several reports.
At the same time, S&P is expected to spare Germany, the Netherlands, Finland and Luxembourg in its long-awaited adjustment of euro zone sovereign ratings.
The French newspaper Les Echos reported the expected downgrades, and France's finance minister confirmed that his country would be downgraded one notch from its triple-A debt rating.
An Italian news agency has also reported that the Italian government has been notified of an imminent downgrade by S&P.
An announcement is expected to come around 4:30 pm ET, after the US stock market has closed.
"Remain alert tonight when U.S. markets close," one euro zone source told Reuters.
US stocks slumped in reaction, though were well off their lows, while European shares closed lower.
In December, S&P placed the ratings of 15 euro zone countries on credit watch negative— including those of top-rated Germany and France, the region's two biggest economies—and said "systemic stresses" were building up as credit conditions tighten in the 17-nation bloc.
Since then, the European Central Bank has flooded the banking system with cheap three-year money to avert a credit crunch. At the time, the U.S.-based ratings agency said it could also downgrade the euro zone's current bailout fund, the EFSF.
"The consequence (if France is downgraded) is that the EFSF cannot keep its triple-A rating," said Commerzbank chief economist Joerg Kraemer.
"That may irritate markets in the short term but wouldn't be a big problem in a world where the U.S. and Japan also don't have a triple-A rating anymore. Triple-A is a dying species," he said.
A spokesperson for S&P in Paris declined to comment on the reports.
John Wraith, Fixed Income Strategist at Bank of America Merrill Lynch told CNBC the confirmation of a mass downgrade would be another serious step in the crisis and would lead to a serious worsening of sentiment.
"To a large degree it’s widely anticipated," Wraith said. "However, we think the reality of it is going to have a knock-on, ongoing impact on these markets."
“It clearly deteriorates still further the credit worthiness of a lot of the European banks and just keeps that negative feedback loop between struggling banks and the sovereigns that may have to support them if things go from bad to worse in full force,” Wraith added.
A downgrade could automatically require some investment funds to sell bonds of affected states, making those countries' borrowing costs rise still further.
"It's been priced in for several weeks, but the market had been lulled into complacency over the holidays, and the new year began with a bounce in risk appetite, thanks partly to a good Spanish auction," said Samarjit Shankar, Director Of Global Fx Strategy at BNY Mellon in Boston.
"But the Italian auction brought us back to earth and now we face the specter of further downgrades."
Italy's three-year debt costs fell below 5 percent on Friday but its first bond sale of the year failed to match the success of a Spanish auction the previous day, reflecting the heavy refinancing load Rome faces over the next three months.
—Reuters contributed to this report.
Original source
At the same time, S&P is expected to spare Germany, the Netherlands, Finland and Luxembourg in its long-awaited adjustment of euro zone sovereign ratings.
The French newspaper Les Echos reported the expected downgrades, and France's finance minister confirmed that his country would be downgraded one notch from its triple-A debt rating.
An Italian news agency has also reported that the Italian government has been notified of an imminent downgrade by S&P.
An announcement is expected to come around 4:30 pm ET, after the US stock market has closed.
"Remain alert tonight when U.S. markets close," one euro zone source told Reuters.
US stocks slumped in reaction, though were well off their lows, while European shares closed lower.
In December, S&P placed the ratings of 15 euro zone countries on credit watch negative— including those of top-rated Germany and France, the region's two biggest economies—and said "systemic stresses" were building up as credit conditions tighten in the 17-nation bloc.
Since then, the European Central Bank has flooded the banking system with cheap three-year money to avert a credit crunch. At the time, the U.S.-based ratings agency said it could also downgrade the euro zone's current bailout fund, the EFSF.
"The consequence (if France is downgraded) is that the EFSF cannot keep its triple-A rating," said Commerzbank chief economist Joerg Kraemer.
"That may irritate markets in the short term but wouldn't be a big problem in a world where the U.S. and Japan also don't have a triple-A rating anymore. Triple-A is a dying species," he said.
A spokesperson for S&P in Paris declined to comment on the reports.
John Wraith, Fixed Income Strategist at Bank of America Merrill Lynch told CNBC the confirmation of a mass downgrade would be another serious step in the crisis and would lead to a serious worsening of sentiment.
"To a large degree it’s widely anticipated," Wraith said. "However, we think the reality of it is going to have a knock-on, ongoing impact on these markets."
“It clearly deteriorates still further the credit worthiness of a lot of the European banks and just keeps that negative feedback loop between struggling banks and the sovereigns that may have to support them if things go from bad to worse in full force,” Wraith added.
A downgrade could automatically require some investment funds to sell bonds of affected states, making those countries' borrowing costs rise still further.
"It's been priced in for several weeks, but the market had been lulled into complacency over the holidays, and the new year began with a bounce in risk appetite, thanks partly to a good Spanish auction," said Samarjit Shankar, Director Of Global Fx Strategy at BNY Mellon in Boston.
"But the Italian auction brought us back to earth and now we face the specter of further downgrades."
Italy's three-year debt costs fell below 5 percent on Friday but its first bond sale of the year failed to match the success of a Spanish auction the previous day, reflecting the heavy refinancing load Rome faces over the next three months.
—Reuters contributed to this report.
Original source
Comments
Our times are best understood through the lens of bible prophecy. The Sovereign Lord God, Psalm 2:4-5, is acting to bring forth a revived Roman Empire, that is a German led Europe.
At the appointed time, He will open the curtains, and out onto the world’s stage will step the most credible leader. This Little Horn, or Little Authority, Daniel 7:25, will work behind the scenes in regional framework agreements to change our times and laws to provide order out of the chaos from a soon coming credit breakdown and financial system collapse. The existing rule of law will be replaced by his word, will and way, Revelation 13:5-10, as the First Horseman of the Apocalypse, the rider on the white horse, who has a bow without any arrows, Revelation 6:1-2, is effecting a coup d etat in the Eurozone by transferring sovereign authority from nation states to sovereign leaders and bodies. In the supranational New Europe, national sovereignty will be seen as a relic of a bygone era. Europe’s Sovereign will have have EU wide sovereign authority. The people will be amazed by this, and place their faith and trust in him; they will give their allegiance to his diktat, Revelation 13:3-4.
The Banker regime of Neoliberalism came via the Free To Choose floating currency script of Milton Friedman; but these are now sinking, causing global disinvestment out of stocks and deleveraging out of commodities. The natural result of destructionism is the rise of despotism.
The Beast regime of Neoauthoritarianism, Revelation 13:1-4, is rising in its place. It comes via the 1974 Club of Rome’s Clarion Club for regional global governance. This monster of statism and collectivism is rising from the profligate Mediterranean countries of Italy and Greece. The Beast’s seven heads are rising to occupy in all mankind’s institutions, and its ten horns are rising to govern in all of the world’s ten regions. The Beast system is coming like a terminator that can't be bargained with. It can't be reasoned with. It doesn't feel pity, or remorse, or fear. And it absolutely will not stop, ever until mankind is totally dominated and subdued.
http://tinyurl.com/6pptlqw