Post date: Jan 14, 2012 2:30:44 PM
John Chambers, Standard & Poor's sovereign ratings U.S. chief, explains why the index downgraded the credit ratings of nine euro zone countries in a Black Friday the 13th for the troubled single currency area.
PARIS, FRANCE (JANUARY 13, 2012) (REUTERS) - Standard & Poor's downgraded the credit ratings of nine euro zone countries, stripping France and Austria of their coveted triple-A status but not EU paymaster Germany, in a Black Friday the 13th for the troubled single currency area.
"We put the 16 euro zone sovereigns on credit watch on December 5 ahead of the euro summit. We said at the time that to assuage investor concerns that a greater sharing of the fiscal debt and the fiscal flows at a euro level would likely be necessary in addition to some economic reforms," John Chambers, Standard and Poor's head of sovereign ratings U.S. said during an interview with Reuters on Friday.
"The measures that have been taken so far - simply to tighten the fiscal rules - we think is a misdiagnosis of the problem, which we see more of one of competitiveness," he added.
In a potentially more ominous setback, negotiations on a debt swap by private creditors seen as crucial to avert a Greek default that would rock Europe and the world economy broke up without agreement in Athens, although officials said more talks are likely next week.
If Greece cannot persuade banks and insurers to accept voluntary losses on their bond holdings, a second international rescue package for the euro zone's most heavily indebted state will unravel, raising the prospect of bankruptcy in late March, when it has to redeem 14.4 billion euros in maturing debt.
S&P cut the ratings of Italy, Spain, Portugal and Cyprus by two notches and the standings of France, Austria, Malta, Slovakia and Slovenia by one notch each.
The move puts highly indebted Italy on the same BBB+ level as Kazakhstan and pushes Portugal into junk status.
It put 14 euro zone states on negative outlook for a possible further downgrade, including France, Austria, and still triple-A rated Finland, the Netherlands and Luxembourg.
Germany was the only country to emerge totally unscathed with its triple-A rating and a stable outlook.