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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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Wed, 01/18/2012 - 12:38 | 2074568 Snakeeyes
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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.


Wed, 01/18/2012 - 12:45 | 2074596 NotApplicable
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!

Wed, 01/18/2012 - 13:10 | 2074698 Pladizow
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Wed, 01/18/2012 - 13:14 | 2074718 Zero_Sum
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Egan-Jones appears to be the only ratings agency worthy of the title. And for that they must be ridiculed and punished.

Wed, 01/18/2012 - 15:43 | 2075469 agent default
agent default's picture

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

Wed, 01/18/2012 - 17:16 | 2075782 johnu1978
johnu1978's picture

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



Wed, 01/18/2012 - 17:39 | 2075855 fockewulf190
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.

Wed, 01/18/2012 - 12:58 | 2074651 Fips_OnTheSpot
Fips_OnTheSpot's picture

I wonder how we ever exported autos before EUR

Wed, 01/18/2012 - 13:03 | 2074677 Oh regional Indian
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?



Wed, 01/18/2012 - 13:08 | 2074692 Fips_OnTheSpot
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.

Wed, 01/18/2012 - 15:59 | 2075521 Ryman1075
Ryman1075's picture

Beware the ides of March...

Wed, 01/18/2012 - 12:39 | 2074573 SheepDog-One
SheepDog-One's picture

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

Wed, 01/18/2012 - 12:45 | 2074586 Fips_OnTheSpot
Fips_OnTheSpot's picture

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

Wed, 01/18/2012 - 13:18 | 2074741 blindfaith
blindfaith's picture

any why Bloomberg can print " confidence in Germany rebounds"

Wed, 01/18/2012 - 12:39 | 2074575 The Reich
The Reich's picture

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

Wed, 01/18/2012 - 12:53 | 2074637 Schmuck Raker
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.

Wed, 01/18/2012 - 13:13 | 2074715 blindfaith
blindfaith's picture

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

Wed, 01/18/2012 - 15:02 | 2075286 Alea Iactaest
Alea Iactaest's picture

I re-read the OP looking for /s

Wed, 01/18/2012 - 17:53 | 2075926 fockewulf190
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.

Wed, 01/18/2012 - 12:40 | 2074580 HoofHearted
HoofHearted's picture

I love Sean Egan!

Wed, 01/18/2012 - 14:11 | 2075015 LongSoupLine
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.

Wed, 01/18/2012 - 12:41 | 2074584 qussl3
qussl3's picture

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

Wed, 01/18/2012 - 16:02 | 2075528 Ryman1075
Ryman1075's picture

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

Wed, 01/18/2012 - 12:42 | 2074587 GeneMarchbanks
GeneMarchbanks's picture

Sean is way ahead of the game.

Wed, 01/18/2012 - 12:43 | 2074588 Dick Darlington
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!

Wed, 01/18/2012 - 12:43 | 2074589 SheepDog-One
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!

Wed, 01/18/2012 - 12:45 | 2074603 NotApplicable
NotApplicable's picture

Which is known as a "strong dollar policy."

Wed, 01/18/2012 - 12:59 | 2074655 Fips_OnTheSpot
Fips_OnTheSpot's picture

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

Wed, 01/18/2012 - 13:16 | 2074722 blindfaith
blindfaith's picture

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

Wed, 01/18/2012 - 15:04 | 2075294 Alea Iactaest
Wed, 01/18/2012 - 12:44 | 2074592 Everybodys All ...
Everybodys All American's picture

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

Wed, 01/18/2012 - 12:45 | 2074599 Dick Darlington
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.


Wed, 01/18/2012 - 15:07 | 2075308 Alea Iactaest
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.)

Wed, 01/18/2012 - 12:45 | 2074601 Kayman
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.

Wed, 01/18/2012 - 12:46 | 2074602 Cognitive Dissonance
Cognitive Dissonance's picture

This downgrade will make a bunch of Krauts sour.

Wed, 01/18/2012 - 12:46 | 2074607 NotApplicable
NotApplicable's picture

But I thought bad was good?

Wed, 01/18/2012 - 14:59 | 2075271 NoClueSneaker
NoClueSneaker's picture

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

Wed, 01/18/2012 - 12:46 | 2074608 Manthong
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?

Wed, 01/18/2012 - 12:47 | 2074612 tekhneek
tekhneek's picture

Bad Germany! Bad!

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

Wed, 01/18/2012 - 12:48 | 2074619 847328_3527
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

Wed, 01/18/2012 - 12:48 | 2074620 Theta_Burn
Theta_Burn's picture

Eurozone aside

When will England get their 15 Minutes of fame? 

Wed, 01/18/2012 - 12:52 | 2074631 GeneMarchbanks
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...

Wed, 01/18/2012 - 13:18 | 2074735 Oh regional Indian
Oh regional Indian's picture

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

Big mysteries....


Wed, 01/18/2012 - 12:48 | 2074621 The Axe
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

Wed, 01/18/2012 - 14:23 | 2075080 i-dog
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.....

Wed, 01/18/2012 - 12:54 | 2074641 monopoly
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.


Wed, 01/18/2012 - 12:56 | 2074649 Tsar Pointless
Tsar Pointless's picture

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


Wed, 01/18/2012 - 13:00 | 2074659 SixFeetFromTheHedge
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...

Wed, 01/18/2012 - 13:05 | 2074683 NotApplicable
NotApplicable's picture

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

Wed, 01/18/2012 - 13:01 | 2074667 marcusfenix
marcusfenix's picture

terrorist! belligerent! enemy combatant! saboteur of finical safety and stability!

this man Sean must captured at once! his terrorist organization destroyed, razed to the ground and cast into oblivion! send in the drones, civilian casualties are acceptable (though we will not speak of them) as this is a war! a war for the fiat safety and security of the homeland.

He must be brought to bay for frighting the mass herds of sheep away from all things paper, for putting doubts in their culled minds, for only through strength, unity and unquestioning loyalty to the supreme power of printed paper do we flourish and thrive as a nation, a world, and race of civilized, collectivist beings. Join the collective in denouncing this evil, vitriolic usurper of our brave new world, to the deepest darkest dungeon with him, without trail, without due process, the sooner the better!  


Wed, 01/18/2012 - 13:03 | 2074678 Money 4 Nothing
Money 4 Nothing's picture

Render to Caesar, or pay the consequences. No pun intended.

Wed, 01/18/2012 - 13:06 | 2074686 NotApplicable
NotApplicable's picture

In other news, the IMF wants a $500B handout.

Why so little?

Wed, 01/18/2012 - 13:13 | 2074712 Everybodys All ...
Everybodys All American's picture

Even better the ponzi IMF will be asking for the money from the same countries they intend to hand it out to.

Wed, 01/18/2012 - 13:10 | 2074699 sabra1
sabra1's picture

sure, all downgrades occur after euro markets close, euro markets shrug off all downgrades, all markets up the next day! all choreographed like a ballet!

Wed, 01/18/2012 - 13:29 | 2074780 fuu
fuu's picture

EJ in the house.

Wed, 01/18/2012 - 13:28 | 2074782 LasVegasDave
LasVegasDave's picture

Downgrade macht frei?

Wed, 01/18/2012 - 13:34 | 2074814 Frank N. Beans
Frank N. Beans's picture

I'll bet Sarcozy feels better about this.

Wed, 01/18/2012 - 14:03 | 2074978 DavidC
DavidC's picture

And still stock markets are rising...


Wed, 01/18/2012 - 16:07 | 2075546 supermaxedout
supermaxedout's picture

Germany downgraded. But who cares.

Euroland is about to give a shit on the rating agencies, which are anyhow just representing an opinion. 

The only problem is, that huge institutional investors in Europe such as Allianz, Zuerich Financials etc have in their internal "laws" a paragraphe which deals with the quality of their investments. And here the opinions of the 3 big rating agencies do play a mayor role giving green light (or not) to invest in lets say the debt of France or the debt of Toyota.

But this is now changing: There is something in the making. I have read, that the "modus operandi" of an institution called "Stiftung Warentest" is serving as a blue print. ( "Stiftung Warentest" is a Public Foundation for the purpose to test all kind of tangible and intangible products) This foundation is located in Germany, operates highly succesful, is a very popular and trusted  organisation, is operating since appx 40 years, is dealing with all kind of products.  Including the rating of saving plans, combined life/capital insurances and some other products offered by local Finance Industry in Germany.  Stiftung Warentest is in principle a consumer watchdog, well capitalized and very succesful. Their rating matters a lot in Germany. Producers and importers of all kind goods do fear their ratings.

I have read now on two occasions, that whether Stiftung Warentest should serve as the model for a new organization  to act as a European Rating agency or , that Stiftung Warentest is extending somehow the range of their services, maybe direct or through an affiliate company or so). The "rating" of products offered by the Finance Industry was till now a relative small side line,  mostly dealing with "products" offered by insurance industry.

One thing is clear, the opinions of independent, non-commercial  rating agencies are badly needed and an organization similar to Stiftung Warentest would be much more objective than S&P for example.

Of course it takes some time to establish such an agency but in my opinion it is well manageable.  There exists proven software for "rating" purposes which is used all over the world by auditors or institutional private equity investors. But to find in a short time the skilled personel in the numbers needed could be a limiting factor for the quick establishment of such an agency.


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