FT - S&P ratings warning to top euro nations

Mr_Mumble

Standard and Poor’s has warned Germany and the five other triple A members of the eurozone that they risk having their top-notch ratings downgraded as a result of deepening economic and political turmoil in the single currency bloc.

The US ratings agency is poised to announce later on Monday that it is putting Germany, France, the Netherlands, Austria, Finland, and Luxembourg on “creditwatch negative”, meaning there is a one-in-two chance of a downgrade within 90 days.

It warned all six governments that their ratings could be lowered to AA+ if the creditwatch review failed to convince its experts.

With regard to Germany, S&P said it was worried about “the potential impact (...) of what we view as deepening political, financial, and monetary problems with the European economic and monetary union.”

The agency is moving as eurozone governments make further progress towards a comprehensive deal to contain the region’s sovereign debate crisis ahead of a crucial EU summit on December 9. Berlin and Paris want the eurozone to sign up to tougher fiscal rules to calm investors’ worries.

FT Alphaville link (paywalled FT link)

Fiscal integration may help the PIIGS but it makes the core 'AAA' countries less creditworthy. Rather obvious but interesting timing for a credit-watch nonetheless.

Generali

AIUI, the EFSF ('bail out fund') only works if France and Germany are AAA rated.

Wookster

This really is quite astonishing.

No doubt this will ramp up efforts by the EU to [STRIKE]stiffle[/STRIKE] regulate the rating agencies.

Its a pity that S & P is 10 years late with its warning.

vivatifosi

Generali wrote: »

AIUI, the EFSF ('bail out fund') only works if France and Germany are AAA rated.

That reminds me of a couple of tweets by the fake Merkel:

Angela_D_Merkel Angela Merkel

How many EFSFs does it take to change a lightbulb? #efsfjoke

29 Nov Favorite Retweet Reply


Angela_D_Merkel Angela Merkel

It's impossible, they don't have any leverage. #efsfjoke

29 Nov Favorite Retweet Reply

Generali

The update to this is that S&P have put 15 EU countries on negative watch. It's the 17 countries of the Euro that have been marked for possible downgrade with the exceptions of Greece who can't be downgraded any further without actually stopping making payments on their debts as their credit rating is already so low and Cyprus which is already on negative watch!

For the gamblers out there, it's about an even money chance of being downgraded if you get put on the naughty list like this.

A side effect of this is that the 'Basle III agreement', an agreement between the Central Banks of the world to change a lot of risk and reserve regulations of banks is now in tatters. There simply isn't enough AAA rated debt left for banks to use in their reserves.

michaels

So who would be left with top ratings from all 3 agencies - Switzerland, Norway, Canada, Singapore, Denmark and - amazingly, UK?

shortchanged_2

michaels wrote: »

So who would be left with top ratings from all 3 agencies - Switzerland, Norway, Canada, Singapore, Denmark and - amazingly, UK?

Who all clubbed together and slipped a tenner to each of the ratings agencies bosses.

Road_Hog

Generali wrote: »

AIUI, the EFSF ('bail out fund') only works if France and Germany are AAA rated.

France is in line for a two notch deduction, that would put the kibosh on them.

Generali

michaels wrote: »

So who would be left with top ratings from all 3 agencies - Switzerland, Norway, Canada, Singapore, Denmark and - amazingly, UK?

That's it. Aus gets 2 lots of AAA and one AA+. The Isle of Man is only covered by 2/3 agencies but they both have it as AAA.

michaels

Anyone with access to a Reuters terminal able to let us know if CDS's are telling the same story?

Generali

michaels wrote: »

Anyone with access to a Reuters terminal able to let us know if CDS's are telling the same story?

CDSs are OTC (ie not traded on an exchange like shares or bonds are for the most part) so prices aren't so accurate from places like Reuters or Bloomie.

Markit provide a service for CDS pricing and it's how we price ours at work. They have a free report:

http://www.markit.com/cds/most_liquid/index.html

it has some Sovereign debt on it but I don't know whether any pertinent ones are on there.

Otherwise it costs a few bucks a time to price a CDS.