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Moody's Projects Inability To Downgrade Greece On Iceland, Threatens Baa3 Rating
Moody's, whose inability to downgrade Greece has made the late night credit trader comedy circuit, as a dump below A would be the formal start of the real-deal Greek funding crisis, has decided to project its downgrade insecurities on Europe punching bag Iceland instead: just what the brankrupt country needs. In a press release earlier the Moody's experts note "Moody's Investors Service said today that the breakdown in the talks between the governments of Iceland, the United Kingdom and Netherlands to resolve the Icesave dispute puts the Icelandic government's Baa3 rating under downward pressure." In the meantime, we are curious what the new index of Financial Conditions, created by such objective individuals as Goldman's Hatzius, DB's Hooper, ex-FRBNY's "Napoelon" Mishkin, NYU's Kermit Schoenholtz and Princeton's Mark Watson, says about availability of credit in Greece.
Full Moody's Iceland threat:
London, 26 February 2010 -- Moody's Investors Service said today that the breakdown in the talks between the governments of Iceland, the United Kingdom and Netherlands to resolve the Icesave dispute puts the Icelandic government's Baa3 rating under downward pressure. This is because Moody's believes the failure to reach a new agreement is likely to lead to an extended delay of the IMF programme, a weaker economic recovery and potentially, political instability. Overall, Moody's believes that Iceland's path out of the crisis now appears more difficult.
The renewed talks to reach a new agreement on Icesave were required because intense popular opposition to the earlier arrangement had prompted Iceland's President to refuse to sign the legislation in early January. At that time, Moody's considered that -- despite concerns that a protracted standoff with the British and Dutch governments would complicate Iceland's exit from the crisis -- it was premature to take any rating action. All parties had a strong interest in a new agreement that would put Iceland on the road to recovery and possible EU accession. "However, Moody's now believes that this assumption may turn out to be optimistic in light of recent events," explains Kenneth Orchard, Vice President -- Senior Credit Officer in Moody's Sovereign Risk Group.
The Icelandic government has announced that a referendum on the previous agreement will be held on 6 March 2010, but opinion polls suggest that the agreement will be voted down by a wide margin.
Moody's notes that a "no" vote in the referendum may prevent access to significant external liquidity from the IMF and Nordic governments, as the UK and Netherlands have been blocking progress on the IMF programme pending a resolution of the Icesave dispute. The lack of extraordinary external liquidity from the IMF and Nordic governments could decrease confidence in the currency and delay the removal of capital controls. It also eliminates an emergency backstop should the government encounter difficulties in re-financing the external debt that matures in late 2011 and 2012.
"A rejection of the agreement would also prolong the uncertainty surrounding the economic and political outlook, and threaten to derail the nascent recovery," adds Mr. Orchard. Although the economy performed better than expected in 2009, a robust recovery may not emerge until 2012 or even later. New investment in the aluminium and power sectors was expected to materially dampen the depth of the economic contraction this year, but the halt in the IMF programme may preclude access to the foreign capital necessary for such investment.
Moody's emphasises that Iceland's path out of the crisis now appears more difficult. The government's budget deficit and debt affordability indicators are among the worst of any investment grade-rated sovereign. The government is planning substantial fiscal tightening over the next five years to bring the deficit under control and reduce the debt service burden to a manageable level. However, the possible emergence of political instability following the referendum could prevent the government from returning its attention to such important domestic matters.
The last rating action on Iceland was implemented on 11 November 2009, when Moody's downgraded the ratings to Baa3 (stable outlook) from Baa1 (negative outlook).
The principal methodology used in rating the Government of Iceland is Moody's Sovereign Bond Methodology, published in September 2008, which can be found at www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's website.
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Free Iceland from the shackles of the banking oligarchs !
Iceland is the test of our all freedom.
Go Island !
Shame on Netherlands & UK.
This is because Moody's believes the failure to reach a new agreement is likely to lead to an extended delay of the IMF programme, a weaker economic recovery and potentially, political instability.
Going to be tough to activate an Al-Queida cell in there so we can invade because of terrorism.
Icelend rejected to pay interest of 5.5% interest and therefore the talks ended.
They ARE willing to pay off their debt, just demand for a FAIR interest on it.
Netherlands & UK are trying to profit from their malaise.
The US & UK loved to see Iceland on their knees so they can be exploited for their natural recources.
They are financial terrorist nations.
Go Iceland! Stick it to those Euro-pimps.
March 6th, 2010...true democracy in action. I hope that the Icelandic people stick it to the corrupt bastards that bankrupted them.
Baa3; is this higher or lower than the rating for Moody's itself?
Whether I'm a whore or not has nothing to do with the fact that I'm calling you a whore, other than the fact that I should know what a whore is from personal experience. Which, now that I think about it, greatly increases my expertise and thus the quality of the whore rating I give you.
So there!
<sarcasm off>
Ah Iceland, the first to fail and of course because of socialism...
eh, what?
Pay no attention to posts like the one above yours. They are there to reinforce the posters belief system, not to make sense or contribute to the discussion. Nothing more than ugly public masturbation.
Anything is a contribution to a discussion. As soon as you start falling in the constructive/destructive contribution, you prop up censorship.
As to making sense, it was indeed more a mock comment.
Over the last days, many comments stated that Greece was the first European nation to fall and this because of socialism, making it an irony.
As far it is known, Iceland was the first european nation to fall, and to keep consistency, as economists' tendencies are well known, it could but be because of socialism.
When Iceland thrived, it was because of capitalism. When it fell, it was because of socialism.
Or it could just be that the central banks carry traded the HELL out of them to the tune of 10x their GDP.
Google glacier bonds.
I am quite familiar with Iceland's situation.
People like to depict what is happening as a disaster.
Fact is that Iceland has been doing good.
They live at the outskirts of a huge consumption sink (main Europe) with all the consequences.
If they did not commit themselves into what they did, their situation would be worse.
They have a bit of pay back to complete right now. But this pay back is nothing compared to the real wealth they pocketed in thanks to the Ponzi scheme they started.
"They have a bit of pay back to complete right now. But this pay back is nothing compared to the real wealth they pocketed in thanks to the Ponzi scheme they started."
You're not familiar with anything. The private jets left the airport. There's nothing to PAY back. It was all carry trade. If it's not unwound then unwind it.
They drove McDonald's out of the country. You know how hard it is to drive McDonalds out of anywhere?
There are no more iceland billionaires. It collapsed because it wasn't real. The wealth shifting took place between the entire country and a few people there and a few people in europe.
When they default on the debt. The real wealth shifting that is supposed to happen won't. There's a reason why weddings don't cost more than the couple earns in it's entire life and there's a reason why sweet 16 parties don't cost more than her parents can earn in their entire life. Because THAT would be STUPID.
Mishkin is a criminal. He was, is and always will be, a member of the biggest criminal syndicate the world's ever seen, the Federal Reserve.
There are two criminal organizations you never leave, though you might retire or move on.
The CIA and the Federal Reserve.
Iceland could well be the last functioning democracy in the known Universe - I do not however think it holds much of a chance against the Fagans that inhabit the side streets of London and Amsterdam.
They will endeavour to crush such impudence with a Iron Fist now that the velvet glove does not seen to work for these Icelandic peasants.
Fuck Moody's. Rick's Cabaret add's more legitimate value to our economy.
Deep Shah.
Thank you for the update Tyler.
That said, the rating agencies have jumped the fucking shark almost as much as the Fed. Don't know if I'm the only one or in a minority, but I do NOT pay any attention anymore to anything that comes out of Moodys or S&P. They are proven fucking liars and pieces of shit so why bother.....
Moody's and S&P rating agencies are whores doing the political bidding of gevernments. Both Iceland and Greece (and many others) are effectively bankrupt. The fact that the rating agencies say otherwise is meaningless.
If I were Icelandic, I'd fight this one to the death. Tell Moody's, UK, Netherlands to fuck off. Imprison the Icelandish bankers that helped sink them, and go back to fishing, screwing and promoting tourism.
And to think that we are sending our kids to their death searching for bearded impoverished guys who live in caves when the real terrorists are living in a lap of luxury among us.
FFS wake up America before it's too late.
I fully sympathize with Island but Moody's assessment seems perfectly reasonable ! Care to elaborate ?
For anyone who's interested in joining, here's a FB group for Icelandic solidarity:
http://www.facebook.com/group.php?v=info&gid=243747486020
Here it is....
How about within 24 months....
The top rating of all sovereigns: BAA
All the rest : NR
I find it incredible that domestic borrowers in Iceland had the liability converted into Euro, despite the fact there was no clause within the agreements for this to happen.
The Icelandics have been so badly fucked on this one. The reason the Icelandic banks lost so much money was because they were having their faces ripped off in every deal they did, but were too dumb to realize. Then the western banks called the hand, knowing they could not cover their losses.
These losses were incurred by private banks and the foreign governments tricked the Icelandic government into guaranteeing these debts before they realized how large they were. So now, the burden falls on the ordinary citizenry and I know if I was in their position, I would be trying to bring about a revolution.
The solution for Iceland is the same as the solution for Greece. If you get too much shit from the EU, call Russia. Start making nice with Putin and I'm sure that interest bill will disappear quickly.
Europe is still spiteful of the Vikings.
Its so ironic that moodys is downgrading any country after giving AA and AAA ratings to the junk (MBS) that Iceland bought that brought it the present financial crisis that it is in. Hypocracy at its peak.
"If you get too much shit from the EU, call Russia. Start making nice with Putin and I'm sure that interest bill will disappear quickly."
They did that, Russia laughed and told them where to go.
Stop making Iceland out as an innocent party here. The Icelandic government was fully behind Icesave, the finance minister went on a publicity tour promising to guarantee depositors. The banks and government were in cahoots to rob ordinary citizens.
This is what this money id for, ordinary savers putting their saving into a Bank. Depositors in the EU/EEA are (like in the US with FDIC) guaranteed up to a certain amount. Iceland decided to honour the guarantee only for Icelandic citizens.
How would you like it if the American bank you were paying your wages into folded and the Mexican owners (that you were unaware of) declared that only Mexicans passport holders would get their deposits back and Americans get nothing?
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