S+P Downgrade Warning on European Sovereign Debt May throw Spanner in the Works

When it really counted in the past in the lead-up to the financial crisis S+P and other ratings agencies failed to warn about the quality or lack thereof of the asset backed financial derivatives that caused so much disaster in the financial crash. Now possibly to show that are acting responsibly and prudentially S+P is  warning that they may be downgrading the sovereign debt of the Euro-zone countries, in many cases from AAA to AA. Downgrades may well make sense where Greece is concerned but how can they make sense where France, Germany and Luxembourg are concerned ? It is a pity that the Euro zone countries are having a hard time reaching a comprehensive agreement on how to use the ECB and their special stabilization fund effectively to end the uncertainty over the future of their debt management policies but the threatened downgrades don’t make much sense if they are applied across the board. Furthermore, the austerity that is being demanded of these countries makes little or no sense in view of the possibility of recession returning in Europe because of the crisis. The timing of this announcement has  also raised eyebrows because if it scares investors away from buying these debt instruments it will only make matters worse.

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About haroldchorneyeconomist

I am Professor of political economy at Concordia university in Montréal, Québec, Canada. I received my B.A.Hons (econ.&poli sci) from the University of Manitoba. I also completed my M.A. degree in economics there. Went on to spend two years at the London School of Economics as a Ph.D. student in economics and then completed my Ph.D. in political economy at the University of Toronto. Was named a John W.Dafoe fellow, a CMHC fellow and a Canada Council fellow. I also was named a Woodrow Wilson fellow in 1968 after completing my first class honours undergraduate degree. Worked as an economist in the area of education, labour economics and as the senior economist with the Manitoba Housing and Renewal Corporation for the Government of Manitoba from 1972 to 1978. I also have worked as an economic consultant for MDT socio-economic consultants and have been consulted on urban planning, health policy, linguistic duality and public sector finance questions by the governments of Manitoba, Saskatchewan,the cities of Regina and Saskatoon, Ontario and the Federal government of Canada. I have also been consulted by senior leaders of the British Labour party, MPs from the Progressive Conservative party, the Liberal party and the New Democrats on economic policy questions. Members of the Government of France under the Presidency of Francois Mitterand discussed my work on public sector deficits. I have also run for elected office at the municipal level. I first began to write about quantitative easing as a useful policy option during the early 1980s.
This entry was posted in austerity, classical economics, deficit hysteria, deficits and debt, European debt crisis, European financial stability fund, Greek sovereign debt crisis, Italian debt crisis, Uncategorized. Bookmark the permalink.

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