S&P Downgrades France

Voltex

France has lost her AAA rating.

http://blogs.wsj.com/eurocrisis/2012/01/13/europe-crisis-live-blog-sp-downgrade-imminent/?mod=google_news_blog

Not sure if there will be more countries downgraded.

later12

Not a surprise: well flagged and possibly probably priced into French yields since about November. Still stable with Moody's & Fitch of course.

At least there was a bullet in the pistol this time
http://uk.reuters.com/article/2011/11/11/uk-france-ratings-sandp-error-idUKTRE7AA12820111111

hatrickpatrick

Sarkozy's getting all angsty about it.

Watch how the harsh medicine prescribed to everyone else by our king and queen of europe will suddenly become "inappropriate" when it's one of them...

later12

France announced tougher austerity measures than Ireland in 2012, in terms of a fiscal consolidation as a percentage of GDP.
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Btw, full announcement from S&P

• In our view, the policy initiatives taken by European policymakers in recent weeks may be insufficient to fully address ongoing systemic stresses in the eurozone.
• We are lowering our long-term ratings on nine eurozone sovereigns [Italy, Portugal, Cyprus, Spain, Austria, France, Malta, Slovakia, and Slovenia] and affirming the ratings on seven [Belgium, Estonia, Finland, Germany, Ireland, Luxembourg, and the Netherlands]
• The outlooks on our ratings on all but two of the 16 eurozone sovereigns are negative. The ratings on all 16 sovereigns have been removed from CreditWatch, where they were placed with negative implications on Dec. 5, 2011 (except for Cyprus, which was first placed on CreditWatch on Aug. 12, 2011).

Sand

Good news for Ireland. The more discomfort the core is placed under, the more likely it is the core will wake up out of its stupor and actually attempt to solve the problem. Kicking the can down the road has been the plan for years now. And here we are.

Mr.Micro

Sand wrote: »

Good news for Ireland. The more discomfort the core is placed under, the more likely there is the core will wake up out of its stupor and actually attempt to solve the problem.

Is the problem solvable in the current set up for the Eurozone countries? I do not think so. Too many sick patients glued together by the Euro, where the relatively healthy ones gets infected by the sicker ones. One crisis to the next. Who is going to have faith in Sarkozy now that his country has also been diagnosed with fiscal anemia?

later12

Mr.Micro wrote: »

Is the problem solvable in the current set up for the Eurozone countries? I do not think so.

Why not? Of course it is solvable. I can't think of any other topical economic or financial question which is as amenable to basic economic principles as this one.

The problem is that neither the naughty actors nor the more polished actors are amenable to that logical solution: Eurobonds and fiscal union.

Sand

Well, the problem is solvable - right from the start, the solution is and was always going to be one of inflation, transfers or default. The ECB ruled out inflation and default. The Germans ruled out transfers, inflation and default. Its not the problem cant be solved - its that the decision makers have ruled out solutions. The ECB in particular under Trichet recklessly campaigned on the basis of forcing transfers by ruling out all other options. They badly miscalculated the true resistance of German voters to those transfers. And to the true resistance of all other voters to the conditions Germany would demand for such transfers.

So the crisis we are currently encountering is a direct result of the Eurozones staggeringly inability to deal with what are very small peripheral problems. This has sent a signal to markets that if the Eurozone cant handle Ireland, Greece and Portugal then they wont be able to handle Spain or Italy. And if they cant handle Spain or Italy, then the whole edifice will topple.

The problem can still be solved very quickly but it will mean picking one of transfers, inflation or default. If the ECB and the Germans refuse to backdown, then the various Eurozone states will find their own solution - default. The idea that Eurozone members require permission from the ECB or Germany to default on their debts is going to be sorely tested throughout 2012.

screamer

Thank God for that, I think S&P may finally have given them a dose of reality, to get off their ass and sort the problem out, problem is, I really believe they've not got a brain between them, much the same as our own fine dignitaries. United States of Europe or bust, it's their call now......

thebman

"This won't torpedo the work of the EFSF," Ms. Merkel said.

Personally I think it is exactly what they want to do. Isn't there a bond auction for the EFSF coming up?

I think S&P knew in November they were going to do it and just waiting for a time that suited them to do it. So what are S&P getting in return for this I wonder and from whom?

later12

thebman wrote: »

Personally I think it is exactly what they want to do. Isn't there a bond auction for the EFSF coming up?

You're saying that they don't want the EFSF to succeed?

That just defies all logic.

So what are S&P getting in return for this I wonder and from whom?

This is getting into conspiracy theory territory, but it's worth pointing out the principle of 'the issuer pays' when it comes to ratings. If anything, one should be arguing that the RAs are too reluctant to downgrade sometimes.

What exactly is so irrational about these downgrades,in your opinion? They seem quite timely and rational from where I'm standing.

thebman

later10 wrote: »

You're saying that they don't want the EFSF to succeed?

That just defies all logic.

Not saying they don't want to succeed.

This is getting into conspiracy theory territory, but it's worth pointing out the principle of 'the issuer pays' when it comes to ratings. If anything, one should be arguing that the RAs are too reluctant to downgrade sometimes.

What exactly is so irrational about these downgrades,in your opinion? They seem quite timely and rational from where I'm standing.

There are arguments both ways since it is perceived that their decisions are not properly based on economic reasoning and politics plays into it too much.

http://www.reuters.com/article/2011/12/15/us-noyer-ratings-idUSTRE7BE05I20111215

later12

thebman wrote: »

Not saying they don't want to succeed.

Then what are you saying?

You said you think they want to torpedo the work of the EFSF
That makes no sense. Why would they possibly want to do this?

This decision has nothing to do with the EFSF apart from the fact that the ratings agency S&P thinks that the crisis mechanism as it has been designed to date is inadequate. That should make perfect sense to any rational observer.

Voltex

The whole Euro was/is an exercisce is political idealism...and it will be political will that will save it.
I recently read a short essay by Paul Krugman back in 1997 where he basically predicted this whole situation.

Looking back at this video you cant help but admire her
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http://www.youtube.com/watch?v=U2f8nYMCO2I&lc=2MKRM_n5JL0jjmahdyZNFPEZJU0dIuq7NyfX0jo9PNg&feature=inbox[/URL]

AllGunsBlazing

Downgraded by S&P due to a lack of growth prospects yet Merkel will no doubt ramp up the austerity mantra even more as a result.

Sarkozy will break ranks now that his job is very much on the line - you can count on it.

NIMAN

I must say that the leaders simply are not taking all this seriously enough imho.

I listened to yet another radio news report today say "Sarkozy is meeting to discuss the crisis". AGAIN !!!

Meeting, ,meeting, meeting, meeting. Stop meeting and actually do something about it. This nonsense has been dragging on far too long. Its on the verge of really going belly-up and all this posturing is just easting time.

Voltex

NIMAN wrote: »

I must say that the leaders simply are not taking all this seriously enough imho.

I listened to yet another radio news report today say "Sarkozy is meeting to discuss the crisis". AGAIN !!!

Meeting, ,meeting, meeting, meeting. Stop meeting and actually do something about it. This nonsense has been dragging on far too long. Its on the verge of really going belly-up and all this posturing is just easting time.

with the euro at almost 1.25 to the dollar and heading towards an 11 year low against the Yen, youd think the whole debt crisis was being dragged out on purpose in order to stimulate export demand in Germany and France.