Tuesday, January 17, 2012

Another day, another downgrade

Yes, I know. With the various economic issues taking place in the U.S., the problems of the European Union are not going to seem important to a sizable number of Americans.

Nevertheless, you should pay attention to what is happening. The latest concern about Europe came on Monday, when, as Reuters reports, the S&P hit the downgrade button. Again.

U.S. rating agency Standard & Poor's cut its credit rating of the euro zone's EFSF rescue fund on Monday, and Greece was under pressure to break a deadlock in debt swap talks if it is to avoid an unruly default.

French Finance Minister Francois Baroin said there was no need to shore up the European Financial Stability Facility after S&P downgraded it by one notch to AA+ from triple-A, echoing the view of Germany, the only major euro zone member to retain a top-notch credit rating.

S&P said in a statement the decision was all but inevitable following identical cuts three days earlier to the creditworthiness of France and Austria, two of the EFSF's guarantors.
The Associated Press adds that French president Nicolas Sarkozy responded forcefully to any hints that France's downgrade indicated his country is in financial peril.
“We have to react to this with calm, by taking a step back,” he told reporters during a visit with Spain’s new prime minister, Mariano Rajoy. “At the core, my conviction is that it changes nothing.”
The S&P downgrade Friday — which Sarkozy’s own finance minister called “bad news” — came just 100 days before the president faces what is expected to be a tough re-election campaign.
Of course, that hasn't stopped Mr. Sarkozy's political rivals from pointing the finger of blame at him.

For another look at what Monday's downgrade, consider this report from the Irish Times.

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