Econintersect: Moody’s downgraded Italian government bond rating from A3 to Baa2 with negative outlook. Moody’s posted on their website the reasons for the downgrade:
1. Italy is more likely to experience a further sharp increase in its funding costs or the loss of market access than at the time of our rating action five months ago due to increasingly fragile market confidence, contagion risk emanating from Greece and Spain and signs of an eroding non-domestic investor base. The risk of a Greek exit from the euro has risen, the Spanish banking system will experience greater credit losses than anticipated, and Spain’s own funding challenges are greater than previously recognized.
2. Italy’s near-term economic outlook has deteriorated, as manifest in both weaker growth and higher unemployment, which creates risk of failure to meet fiscal consolidation targets. Failure to meet fiscal targets in turn could weaken market confidence further, raising the risk of a sudden stop in market funding.
Read all the reasons for the downgrade including potential future actions which can be of further effect.
Other Eurocrisis Headlines:
A just published ILO report warns that unless Eurozone changes its policies unemployment in Eurozone could reach 22 million. According to the news release:
“Jobs losses have been especially acute in Southern Europe, but even Austria, Belgium, Germany, Luxembourg and Malta — the only countries where employment has risen since 2008 — are seeing signs that the labour market situation may no longer be improving.”
The corresponding number in the U.S. would be about 20.7 million unemployed, based on total population ratios. This would produce a U-3 unemployemnt rate about 13.4% and a U-6 underemployment rate above 20% (assuming the number for part-time for economic reasons would be unchanged).
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The common currency union was supposed to benefit the economy of the entire European Union. Now that the euro is struggling, however, it is bringing growth down with it. Germany’s economy, once seemingly immune to the crisis, is now facing mounting difficulties. By SPIEGEL Staff
Ratings agency Moody’s on Friday downgraded Italy’s government bond rating by two notches, citing the knock-on effects of a possible Greek exit from the eurozone and Spain’s banking woes.
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