NEW YORK (dailynewyorknews) – The decommissioning of nine euro area governments by Standard & Poor’s was not a surprise, but they came as there were signs of improvement in the debt crisis in the region.
Auctions last week in the Italian and Spanish debt has attracted strong demand, a modest easing of borrowing costs. And recent moves by the European Central Bank have calmed fears of a credit crisis in the banking system.
S & P said the downgrade was driven by “insufficient” by European political leaders have failed to fully address the root causes of the crisis.
The agency also highlighted the risks of a deeper recession than expected, the tightening of credit conditions, higher borrowing costs for a growing number of nations and the simultaneous surge out of debt by households and governments.
The damage can not wreak havoc on financial markets too this week, since S & P only confirms what the market already knew.
“I think it was priced in the market,” said Jeremy Hare, director of investments at Gilford Securities. “I do not see the impact of the country losing its status as AAA or be demoted as a huge problem.”
Greek debt talks break
But the future, S & P warned that most governments facing the euro area could further cuts in borrowing costs remain high or the economy weakens further.
The amount of the debt of euro area governments need to refinance this year is estimated at over € 830 000 000 000, according to HSBC. And that has investors worried.
Italy and Spain, which were both two notches, need to sell billions of euros of bonds in the coming months.
Their recent auctions “were considered to be successful,” said Moritz Kraemer, head of European sovereign ratings at S & P, during a conference call Saturday. But he warned that interest rates for long-term two countries remain high.
The market’s appetite for government debt euro area will be tested this week, when France comes to market with nearly € 9 billion of debt.
France and Austria were both stripped of their AAA ratings, while S & P reaffirmed the high notes of Germany, the Netherlands and Finland.
Source: http://money.cnn.com/2012/01/15/markets/europe/index.htm?cnn=yes&hpt=ibu_c1
