Greece’s credit rating was cut three steps to junk by Standard and Poor’s, the first time a euro member has lost its investment grade since the currency’s 1999 debut. The euro weakened and stock markets throughout the region plunged.Greece was lowered to BB+ from BBB+ by S&P, which also warned that bondholders could recover as little as 30 percent of their initial investment if the country restructures its debt. The move, which puts Greek debt on a par with bonds issued by Azerbaijan and Egypt, came minutes after the rating company reduced Portugal by two steps to A- from A+.
The turmoil comes as European Union policy makers struggle to agree on measures to ease the panic over swelling budget deficits. Leaders of the 16 euro nations may hold a summit after the Greek government’s decision last week to tap a 45 billion- euro ($60 billion) emergency-aid package failed to reassure investors, a European diplomat and Spanish official said.
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2 comments:
I'm not worried. Our president is on the case. He has appointed a commitee to do a study. Yes the goal will be to look at ways to bring the deficit down to only, yes ONLY, $500 billion a year. And do it quickly. By 2015. Now that's leadership. Why this news alone doesn't cause immediate global selling panic on the world bond market is beyond me.
Why do people expect anything different to happen in the soveregn debt market? Think about it. The only collateral a government can put up for debt is the ability to sell even more debt tomorrow to cover it. Greek creditors have learned this week that this collateral is worthless. Watch for complete collapse of Greek finance within weeks. They will have to break from the Euro. The angry greek unions will still get paid their full salary but it will be in Greek monopoly money. They will be able to thank their highly socialised economy for protecting them.
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