Fitch Ratings downgraded Italy, Spain, Belgium, Cyprus and Slovenia's sovereign debt ratings Friday as it wrapped up a review of the region. Fitch affirmed its rating on Ireland. All six countries ratings carry a negative outlook, which means there is a slightly greater-than-50% chance they are downgraded in the next two years. The euro briefly tumbled on the news, which came mere moments after the common currency climbed above $1.32 for the first time since Dec. 31. However, the euro clawed back all of those losses already. It was most recently trading at $1.3204. The knee-jerk reaction in the currency market was likely short-lived because Fitch's moves weren't considered as severe as the ones taken by Standard & Poor's two weeks ago. At that time, S&P slashed ratings on nine euro-zone members, including stripping France of its triple-A rating. Fitch's review didn't include any triple-A rated euro-zone nations so France's top-notch rating in the eyes of Fitch remains intact. In downgrading the five nations, Fitch said it is concerned about the divergence of monetary and credit conditions across the euro zone. The ratings firm is also worried about the vulnerability of these countries to further monetary and financing shocks. Spain and Italy have seen yields on their sovereign debt fall sharply in recent weeks, thanks in large part to the European Central Bank's long-term lending program. However, Fitch said future shocks could plague the region until the euro zone secures greater economic and financial stability, including great fiscal integration. "The government is aware of the imbalances in the economy and that's why it's launched an ambitious program of structural reform that will be completed in the first quarter," said a spokeswoman at Spain's Finance ministry. Spain's rating was cut to single-A from double-A-minus. Fitch said without further convergence within the euro zone and a broad economic recovery, a breakup of the common currency bloc cannot be completely ruled out. The likelihood of such a scenario remains small, Fitch added. Fitch cut Belgium's rating to double-A from double-A-plus. Cyprus was cut to triple-B-minus from triple-B. Italy's rating was slashed to single-A-minus from single-A-plus. Slovenia saw its rating cut to single-A from double-A-minus. Ireland's rating was affirmed at triple-B-plus.• Belgium cut from AA+ to AA
• Slovenia cut from AA- to A
• Cyprus cut from BBB to BBB-
• Spain cut from AA- to A
• Italy cut from A+ to A-
• Slovenia cut from AA- to A
• Cyprus cut from BBB to BBB-
• Spain cut from AA- to A
• Italy cut from A+ to A-
3 comments:
Fitch has downgraded the credit rating of six eurozone nations.
Rating agency Fitch lowered the debt ratings of the five eurozone countries because of their poor finances and vulnerability to sharp turns in market sentiment, according to statements released in the last few minutes. Ireland escaped the downgrades, but has a negative outlook, as the "near-term economic outlook highlight(s) the greater vulnerability to monetary as well as financing shocks faced by these sovereign governments". More details on those Fitch downgrades. It's only five countries which have been downgraded, despite earlier reports (Ireland remains unchanged at BBB+):
Foreign control of internal finances has worked before, of course (Egypt under Lord Cromer; the Ottoman Empire's customs, etc). But it does tend to need an occupation army (if not always) so the "beneficiaries" tend to be rather less grateful than the controllers expect.
I can sympathise with the German frustrations behind this proposal. Ordinary Greeks may be suffering, but the country is still wasting vast amounts on defence, giving hand-outs to the Orthodox Church which does not need them and is the country's largest tax evader, etc. The Greek Government seems to regard the sufferings of its people as simply a good tactical manoeuvre for its traditional blackmail bargaining positions. That shouldn't be allowed to work.
What this means, I think, is that while there might be a deal on the private sector debt by Monday, there won't be a credible deal on the official part of the bail-out. And of course the PSI bondholders may have agreed in principle to their haircut, but they won't sign up to it until the official part has been agreed.
Which means that we shall still be looking at the possibility of default in March, and countries like Portugal will be even more spooked. I can't see any players in this game who can be easily type-cast as the "good guys"
Agree with a lot of previous comments re Greece broke..default etc, but a question has to be asked of the ratings agencies.
Every time ther is a glimmer of hope the agencies virtually immediately downgrade some country or other and they seem to do it by rotation.
I am not saying that they are incorrect but the timing points to something much more disturbing.
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