Custom Search

Tuesday, January 13, 2009

Eurozone: Spain's Ratings, Fate of the Euro?

The European monetary union isn't likely to survive the stresses of this crisis. The economies, cultures and politics of member states are so diverse (and some historic animosities so great) as to make the kind of cooperation required to get thru this crisis almost impossible.

Abandoning the USD in favor of the higher yielding Euro is a dangerous trade. The risks of the Euro unraveling are growing larger by the day.

Recent volatility in the foreign exchange markets should definitely raise eyebrows. In the end, the USD is still the undisputed reserve currency of the world.

Spain and Italy are the most likely candidates for sovereign default.

The Short View: “If the euorzone could find a way to deal with a member country’s national default, that might confirm the euro’s status as the world’s next reserve currency. But if a solution could not be found, and a country excited, any such ambition would be over, says John Authers.”

Spain’s Long-Term Sovereign Ratings May Be Cut by S&P (Update4): “Spain’s top AAA long-term sovereign ratings may be cut by Standard & Poor’s, putting Spain at risk of its first downgrade from the credit rating company as the country suffers its first recession in 15 years.

S&P cited “significant challenges” facing the Spanish economy and said it would probably decide on the rating this month. Credit-default swaps linked to Spanish debt saw the biggest one-day gain in almost three months, a sign that investors attached a higher risk to Spanish assets.

“Everyone knew that Spain was in trouble, but this is one of the triggers that investors were waiting for,” said Ivan Comerma, head of treasury and capital markets at Banc Internacional-Banca Mora in Andorra. “This is the worst timing as Spain is about to start with its funding plan for this year and the country’s lenders are about to start selling government- backed bonds.”

Spain’s economy, which outpaced the euro region for more than a decade, entered a recession in the second half of last year as the global credit crunch deepened the collapse of a debt- fueled domestic housing boom, sending the unemployment rate to the highest in Europe. The government has announced some 90 billion euros ($120 billion) of stimulus measures, on top of steps to support banks, while tax revenue is falling.”


Greenlander said...

Now if the euro is unstable, wouldnt that put the US dollar on more stable ground despite our crazy fiscal policy? I have seen yr deflation to superinflation scenario, just wondering how a euro implosion would affect the US currency? I used to live in Spain from 2000-2003 and knew that the Italian lira still existed in black market form during that period. Why I don't know.

On another note, I wonder how the yen will behave as they were already traumatized 10 years ago and arent suffering via overleverage in financial sector like Europe and US. Or are they....?

Greenlander said...

I know for sure Spain's RE bubble was even bigger if you measure it relative to was quite inflated even in 2002-2003 said...

well our fiscal policy simply sucks.

replica rolex said...

$75 Replica Rolex Watches sale, Our site provides Rolex replica, replica Rolex Watches, replica breitling, replica Cartier, replica Omega, Tag Heuer Watches. . .more than 100 famous rolex brands"
rolex air king
rolex datejust
rolex day date
rolex daytona
rolex gmt
rolex submariner
rolex yachtmaster
a lange sohne watches
alain silberstein watches
bell ross watches
breguet watches
breitling watches
bvlgari watches
cartier watches
omega watches
patek philippe watches

Anonymous said...

Kelly returns to chi flat ironTV screens adapted DI Anna Travis to the third round of the Above Suspicion, a successful novelist Lynda La Plante on rookie detective.

Throughout the series, chi flat ironsDI Travis steady stream of fans,best flat iron male and final episode of ITV, deadly intent, not the exception. said...

I read a lot of helpful info in this post!