Egan Jones Downgrades Germany From AA To AA-

Tyler Durden's picture

Sean Egan strikes again, this time downgrading Germany from AA to AA-.

Germany maintains its position as the European Union's top economy. However, Germany has been shouldering the burdens of other EU countries via its exposure to the EFSF and indirectly via the ECB's hefty exposure to the weaker banks and the weaker sovereign credits. The country's debt to GDP of 83% as of 2010 (expect near 86% for 2011) and a deficit to GDP of 4.6% is weak (and getting weaker) for a top-tier country. On the positive side, unemployment was only 6.8% but will probably increase as many EU countries implement austerity measures. Other positives were the positive (EUR133B) balance of trade and the positive (EUR193B) current account as of the end of 2010. Inflation has been fairly moderate at 2%, but we expect an increase as a result of the decline in the euro relative to the dollar.


German chancellor Angela Merkel continues to create tension with EU member states by pushing for ratification of changes to the Lisbon Treaty. The government insists that private investors bear more of the costs of further European bailouts. Note, the cost of the bailouts is likely to be absorbed via increased support for the EFSF, the ESM, the ECB and a rise in the number of euros. The fallout from a likely Greek default needs to be monitored.

via Egan-Jones

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Snakeeyes's picture

It had to happen. Germany has unsustainable social programs and debt, just like Italy. But Germany is so dependent on exports (particularly autos) that a hiccup can crush them.


NotApplicable's picture

These days, you can replace Germany with any country in that statement (adjusting their primary export) and have a true statement.

JIT disaster, coming to an economy near you!

Zero_Sum's picture

Egan-Jones appears to be the only ratings agency worthy of the title. And for that they must be ridiculed and punished.

agent default's picture

Consider them an early warning system.  Their views become mainstream in 6-12 months time.

johnu1978's picture

Germany will not be defeated a third time. I can promise you that!



fockewulf190's picture

Lol! Unless Germany can import hundreds of thousands if not millions of unemployed young turks to fill the ranks of the Fourth Reich's Wehrmacht, it isn't going to happen. The birthrate here is amongst the lowest in the world, the Bundeswehr is being slashed down to about 100k, and since they have done away with the draft, there is a big problem even filling the 5k yearly recruiting quota. Germany may be able to raise another Volkssturm, but they are going to need walking sticks issued with their Heckler & Kochs.

Fips_OnTheSpot's picture

I wonder how we ever exported autos before EUR

Oh regional Indian's picture

So it's all going according to plan then.

Any implosion really begins at the core, not the periphary, right?

Once the "German People" get "angry" and Merkel's options are politically limited (quite a predictable sequence, ne?)...

Perhaps on or around 20th March?



Fips_OnTheSpot's picture

Maybe, some would argue end-of-Feb might already be interesting after 1-10trn "injection" happens.


In other news, I am an IT-pro and I really would like to see the ECB IT-stuff. Not about numbers in EUR or USD, a trillion is *nothing* in 64 or 128bit land. BUT the transactions/sec and bandwidth delivered.

SheepDog-One's picture

Crisis SOLVED! Nothing to see here...move green stocks or get a bullet in the ear.

Fips_OnTheSpot's picture

but..but.. Fitch said we are crisis-safe and keep AAA FOREVAR.

blindfaith's picture

any why Bloomberg can print " confidence in Germany rebounds"

The Reich's picture

Who's  Egan Jones, and where's the news? 

Schmuck Raker's picture

A rating agency with more credibility than S&P, Moodys, and Fitch, because they get paid by Buyers of debt, not Issuers.

blindfaith's picture

well, we're just going to have to change that straight away.  Stray dogs get neutered or rehab.

Alea Iactaest's picture

I re-read the OP looking for /s

fockewulf190's picture

Not a peep about this downgrade being reported by ARD or ZDF. The politicians are blowing off all the recent downgrades as if it's all some kind of American effort to destroy the € and the EU. Egon Jones for most Germans sounds liike a british skeleton athlete they might see on Saturday mornings Wintersportschau. The few who know the deal are storming the bullion dealers buying das Phyzz.

LongSoupLine's picture

Another downgrade and another round of backdoor ponzi to counter it.  Green across the board.  Egan rocks, but is no match (short term) for the power of the printer.

qussl3's picture

At this rate Sean Egan will only be welcome in Iceland.

Ryman1075's picture

Nope...he would downgrade them too. /sarc

GeneMarchbanks's picture

Sean is way ahead of the game.

Dick Darlington's picture

So, in light of the recent mass downgrades in zEuroland, this shud be wildly bullish for bunds. The worse it gets the better the performance type of idiocy def has dominated euro rates trading for quite some time. Make it single A and bunds drop to 1 %. Lol!

SheepDog-One's picture

MAN we kicked Germanys ass AGAIN! Look at their wimpy 86% Debt/GDP, PUSSIES! 

Try to beat USA's 107% Debt/GDP kraut suckin bitchez!

NotApplicable's picture

Which is known as a "strong dollar policy."

Fips_OnTheSpot's picture

in other news they told us it's 79% - for accounting-stuff (once again)

blindfaith's picture

you tell'em Sheepdog...made up numbers don't lie and that is a fact.

Everybodys All American's picture

The markets have turned into one great big socialist engineer's experiment.

Dick Darlington's picture

In other rating agency "news", good ol Fitch throws the kitchen sink in it's crusade to maintain the illusion that all is well.


Alea Iactaest's picture

Funny, I read that headline and don't see any illusion at all. The point being that Italy is, perhaps, core and not periphery. (But I didn't bother to look at the article below the headline.)

Kayman's picture

When you can no longer borrow at zero, then you print (at less than zero).

There is no cost to printing money, right ?  Ask the Bernank.

Who needs credit ratings when the electronic binary system can create wealth without working for it.

Cognitive Dissonance's picture

This downgrade will make a bunch of Krauts sour.

NoClueSneaker's picture

... at least Dr. Wolfgang Strangelove Scheuble ... the architect of the EU - ALDI whole & firesale Enterprise  GmbH....

Manthong's picture

That might have had an adverse impact on the market except for the case that the Iran problem was taken care of and is off the table now.

All those carriers are out of there now, right?

tekhneek's picture

Bad Germany! Bad!

AA- ...? This seems more like a slap on the wrist at the dinner table.

847328_3527's picture

Green shoots everywhere I see...


“It is therefore natural that in a thoughtful age, when men are busy investigating  present problems and curious in studying the past, convinced that no effect is without cause, the story of Rome should engage attention.”


WE Heitland, The Roman Fate, 1922

Theta_Burn's picture

Eurozone aside

When will England get their 15 Minutes of fame? 

GeneMarchbanks's picture

When they threaten to shut off the hyper-hypothecation loop holes that serve to profit half of the US financial firms. So never.

Thought you knew...

Oh regional Indian's picture

Yup GM, there is England and then there is THE CITY and then CROWN CORP...

Big mysteries....


The Axe's picture

Tyler ,   the computers don't care..they decided more people will book cruises on Priceline....Larry Summers will run the World Bank and solve all of the problems of the

i-dog's picture

First Summers bk'd Harvard, then America ... then tomorrow, the world!! LOL!

Meanwhile, back at the ranch, the sheep graze quietly on.....

monopoly's picture

Sure glad none of this affects us and we are de coupled from the rest of the planet. Gives me that warm and fuzzy feeling.


Tsar Pointless's picture

If these ratings agencies would just cease downgrading sovereign nation debt ratings, maybe - JUST maybe - the equity markets would plummet.


SixFeetFromTheHedge's picture

I was surprised to see CNBC tweet that Egan-Jones downgraded Germany... I guess Egan-Jones is becoming one of the big boys now...

NotApplicable's picture

Or it fits with the storyline, so they ran with it.