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S&P: "A Further Greek Downgrade Of One To Two Notches Is Possible Within A Month" (Currently BBB+/A-2)
And the hits just keep on coming: yesterday Fitch, now S&P - Looks like Greece is about to get pounded once again, and that quite soon. One wonders when Moody's may finally wake up.
From S&P
- Downside risks for Greece's real and nominal growth are likely to increase the size of needed fiscal consolidation, raising questions about the feasibility of the country's ambitious budgetary goals.
- Political risks for the timely implementation of the entirety of fiscal reforms continue to be material.
- We are maintaining our 'BBB+/A-2' ratings on the Hellenic Republic on CreditWatch negative.
- The negative CreditWatch implications reflect the possibility of a further downgrade of one to two notches within a month.
Rating Action
On Feb. 24, 2010, Standard & Poor's Ratings Services said that its 'BBB+' long-term and 'A-2' short-term sovereign credit ratings on the Hellenic Republic (Greece) remain on CreditWatch with negative implications.
We initially placed the long-term rating on CreditWatch on Dec. 7, 2009. Then, on Dec. 16, 2009, we lowered the long-term rating to its current level and maintained it on CreditWatch. At the same time, we placed the short-term rating on CreditWatch with negative implications.
Rationale
In our view, a further downgrade of one to two notches is possible within a month.
Since our lowering of the long-term rating on Dec. 16, 2009, the Greek government has presented the 2010 update of its stability program and has also announced additional measures--including a freeze on public sector wages and an increase in fuel taxes--to reinforce its budgetary goal to cut its 2010 general government deficit by 4% of GDP vis-à-vis the 2009 level, to 8.7% of GDP. We view the announcements of additional deficit-reducing measures as a reasonable step toward reducing the public debt burden, given the divergence
between the country's deteriorating economic growth prospects and what we view as overly optimistic growth assumptions underlying the 2010 update (actual results showed a 2% decline in GDP in 2009, versus a 1.2% decline estimated in the update) and its implications for public finances. Greece's large budgetary and external imbalances, combined with a continued weak external economic environment, suggest, in our opinion, that deflationary pressures are likely to compound the country's economic travails. Consequently, we anticipate
further pressures in Greece's banking sector, which would have residual effects on public finances. We believe it is likely that this, in turn, will
put increased pressure on the government's fiscal consolidation efforts if it is to comply with its budgetary targets.
CreditWatch
We believe that a further downgrade of Greece of one to two notches is possible within a month.
In light of recent political, macroeconomic, and financial market developments, we consider the following elements to be of main relevance to our assessment of the Greek sovereign's creditworthiness:
- We view the sovereign's willingness to continue to finance itself in the commercial bond markets according to its current borrowing schedule as an important feature of its creditworthiness. Should the government reduce its reliance on the bond market in favor of running down its cash reserves or extending its accounts payable, we would expect downward pressure on the ratings to increase.
- Our ratings on Greece will continue to depend on the sovereign's stand-alone credit rating fundamentals and not benefit from an implicit rating floor in case of extraordinary support organized by the EMU and its member states. Standard & Poor's may view potential extraordinary EU assistance as a rating support if and when it is formulated, to the extent that we can assess whether such support would lead to a sustained reduction in the government's cost of borrowing and reinforce its commitment to achieving the set budgetary targets. Nevertheless, we believe such assistance is likely to be conditional upon the frontloading of the implementation of the announced measures and is likely to be disbursed over time.
- Greece's banking sector has been facing a more challenging operating environment, which is likely, in our opinion, to negatively affect asset quality and put pressure on profitability. This could imply higher contingent liabilities from the financial sector for the sovereign, which could exert downward pressure on our sovereign ratings on Greece.
- If public support for the government's stability program decreases from its current level, compromising its execution, we could also lower the ratings. Despite the currently apparent strong public support for the Greek government, we believe that implementation risks will persist over the course of the government's current stability program, particularly since we envisage that Greece's recession will be more protracted than that of most other EMU members.
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Failburger, failburger, chit, chit. Mark it gyro!
Bucky's tanking.... quick godamnit, shift the focus back to Greece. We don't want people smelling our own shit....move it..move it..faster.
Well, looks like the Strong Dollar idea is gone, well, for today! Bringing Fannie and Freddie onto the books makes our debt just that much higher.
This contagion in Greece ain't going to stay within the PIIGS or even Euroland. Not even Germany. California, Illinois and a slew of our states are waiting in the dugout for their turn up at bat.
Woe on us.
Yes, as our tax revenues are 2.115 trillion & our national debt is 12.411 trillion, we are insolvent with a 1/6 ratio of income to spending. Forget about comparing debt to GDP, compare to tax revenues. Wiemar Republic, here we come...
"One wonders when Moody's may finally wake up."
Worry not, BS will enforce its deep capture...er...slumber. A Moody's downgrade jeopardizes the ability of Greece to maintain reserves at the ECB. This potential default will put AIG on the hook for all the CDS written on the sovereign and its banks. This bomb is too big even for Ben's bazookas.
http://www.eurosavant.com/2010/02/21/cds-just-another-evanescent-bubble/
I'm sure Uncle Ben is sweating bullets though.
Moody's are waiting for that special phone call from Goldman Sachs; hey, even with expert help, it takes TIME to amend trillions worth of CDS's and derivatives; Even though they are only entries in a big database one also has to forge the transaction logs to be sure of being on the right side of The Market.
I suppose at some point in the past, when I was a bit more naive and a few pounds lighter, I would have wondered how you could downgrade sh*t. But that thought hasn't crossed my mind in years.
Moody's takeover prospect:
http://www.ratemypoo.com/
These people are experts!
Off topic but my jaw dropped when I just saw an add for La Costa Resort in the left hand tile of this site. Read this shit:
http://www.signonsandiego.com/news/2010/feb/18/la-costa-resort-debt-sold-at-big-loss/
This should be a centerpiece of Tyler's next CRE update.
Plus the decline in the Architecture Billings Index, a leading indicator, not lagging for CRE.
Ratings schmatings. They're so behind the curve they're ahead.
Who gives a shit about what S&P has to say about ANYTHING? Anybody who does probably deserves to lose his money. Period.
I 've heard that with enough pressure you can create diamonds,
Of course you call also reach critical mass at ground zero...
Greek official default to be followed immediately by further downgrades
Apparently per Bloomberg even the Greek journalists have gone on strike today to produce a media "blackout". Journalist striking? Am I in bizarro world?
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