Black Friday truly became a day of bad luck for large parts of Europe. After years of an increasingly hard economy, and an increasing debt crisis that has impacted their currency, nine Euro Zone nations were stripped of its triple-A status and downgraded by Standard and Poor’s.
A representative of Standard and Poor’s (S&P) commented that the downgrade was a response to the lack of significant or sufficient action by the nation’s governments to address the economic stresses that have plagued the Euro Zone for years.
Among the nations downgraded was France, Austria, Portugal, Italy, Cyprus, Spain, Slovakia, Malta and Slovenia. Not all nations were simply downgraded by one notch, some nation’s actions have been so insufficient that Standard and Poor’s downgraded them by two notches, including Spain and Italy.
Because of this latest string of downgrades, Portugal has now been put into junk status and Kazakhstan now has Italy to join it in the BBB+ rating.
Germany, that has been acting as a bank for these indebted nations did not face a default as their neighbors did. Having been reluctant to fall into the same traps as the rest of the Euro Zone, Germany’s status has been upheld. Also in the company of Germany was the Netherlands, Ireland, Estonia, Finland, Luxembourg, Belgium and Estonia.
9 european nations downgraded
All fourteen nations in the Euro Zone were placed on alert for further downgrade, with only Germany being maintained as stable. The United State’s stock market took a hit upon the news of downgrades, just after it was downgraded for the first time in its history in 2011. The negative outlook on these countries signifies that it is expected that these nations will face another downgrade in the year 2012-2013.
Francois Baroin, France’s Finance Minister tried to downplay the downgrade despite its huge impact saying that the rating is still excellent, though the result is not good news. Whether having a downgraded rating signifies an excellent rating or not, a downgrade can never be viewed as good news. The downgrade will simply make borrowing money harder for these nations that are already cash strapped as they try interventionist policies that have directly contributed to the worsening situation.