The Dominoes Are Falling


The following articles have been written in the past week:

Standard & Poor’s Lowers Belgium’s Credit Rating

The Standard & Poor’s credit rating agency has lowered Belgium’s long-term credit rating from AA+ to AA- with a negative outlook. S&P said that the Belgian government’s ability to stop the government’s general debt from rising above already high levels was limited by the private sector both in Belgium and its main trade partners. An additional reason for the decreased credit rating was the sale of the Belgian unit of Bank Dexia to the government.

S&P downgrades Spain on weak growth outlook

Standard & Poor’s has cut Spain’s long-term credit rating by one notch, from AA to AA-, because of weak growth and high levels of private-sector debt.

The ratings agency added that the country’s high unemployment would remain a drag on the economy.

Last week the Fitch agency cut Spain’s rating, a process that can raise a country’s borrowing costs.

Moody’s Drops Hungary’s Bond Rating to “Junk”

The Moody’s credit rating agency has dropped its grade for Hungarian bonds to “junk.” Moody’s reduced Hungary’s bond rating from Baa3 to Ba1. The Hungarian cabinet is seeking aid from the International Monetary Fund to shore up its rating. Hungary has the biggest debt of any eastern European nation.

Bank Credit Downgrades?

Toronto based The Globe and Mail republished a Friday, November 18 Reuters article written by David Henry titled ‘S&P to update bank credit ratings within three weeks‘ – reading time 5 minutes. The article says that Standard & Poor’s is planning to update its credit ratings for the world’s 30 largest banks within three weeks, and that those updates may include downgrades. The article specifically mentions Bank of America, Citigroup, and Morgan Stanley as possible downgrades, and says that some European Banks might (likewise) be affected. These updates are said to be “part of a major overhaul of S&P’s methods for scoring creditworthiness of some 750 banking groups”. A managing director at S&P, Jayan Dhru, is reported in the article to have said that the new S&P bank ratings methodology will apply consistent measurements of bank capital, “something that is weak in the ratios banks report under international Basel standards designed by regulations that allow individual countries latitude in how their banks count capital”.

Portugal’s Credit Rating Is Cut to Junk by Fitch on Debt

Portugal’s credit rating was cut to below investment grade by Fitch Ratings due to the country’s rising debt level and weakening economy.

The long-term rating was lowered one level to BB+ from BBB- with a negative outlook, Fitch said today in an e-mailed statement. Portuguese 10-year bonds fell after the announcement, with the yield at 12.14 percent at 1:09 p.m. in Lisbon.

“The country’s large fiscal imbalances, high indebtedness across all sectors, and adverse macroeconomic outlook mean the sovereign’s credit profile is no longer consistent with an investment-grade rating,” Fitch said. The ratings of utility EDP-Energias de Portugal SA and telecommunications company Portugal Telecom SGPS SA are unaffected, Fitch said.

Dagong Global Downgrades Greece’s Credit Ratings

Chinese rating agency Dagong Global Credit Rating Co. said it has cut its credit rating for Greece as the indebted country has ΄completely΄ lost its solvency and has to prepare for a massive debt restructuring.

In a statement, the Beijing-based ratings provider said it downgraded the country’s rating to C from triple-C with a negative outlook. A ΄C΄ rating indicates high default risk.

It projects an economic decline of 7.2% and 6.8% in 2012 and 2013 for Greece, and said it will be very difficult for the country to restore positive growth in the medium term, said the rating agency.

΄Social unrest has intensified, thegovernment΄s ability to control economic and social developments has been dramatically impaired,΄ making the implementation of the E.U.΄s rescue program difficult, Dagong said in a statement.

      
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