FT Deutschland On The Upcoming Austrian AAA-Rating Downgrade
Remember Austria: that "other" AAA-rated country, whose megabank Erste recently made headlines for covering up its sovereign CDS exposure? It appears that AAA rating, which means Austria is still eligible to fund the EFSF, may soon be cut, putting even more pressure on Germany and, of course, France, and thus concerns for ratings downgrades there, to bear the brunt of what is an increasingly impossible bail out plan for Europe. It also means that the market will now be fearing not only a kneejerk reaction to the perpetual French downgrade terror threat courtesy of S&P and Moody's, but can now add not only Hungary and Belgium but also Austria to the list of countries due for some inverse rating agency love trim. As for the catalyst: "In two weeks, Moody's analysts to come to Vienna to assess the situation on the ground. Felderer considers it possible that Austria would put on negative outlook in this review." Alas, it appears that the Grinch is about to steal AAAustria's vaunted rating for Christmas, and push the direction of contagion into a whole new direction.
From FT Deutschland, google translated:
In Austria, a spillover of the Italian financial crisis and a loss of top rating is feared. "Austria is not sitting so safe in his Triple-A, as we would like it," said Bernhard Felderer, head of the Vienna Institute for Advanced Studies, on Wednesday. So far, the country of the three major rating agencies Moody's, Standard & Poor's and Fitch credit rating of the top "AAA" rated. They complain, however, the government in Vienna did not save as much as it could.
Felderer, one of the most famous economists of the country disagreed with his statements to the government in Vienna. Finance Minister Maria Fekter holds the top rating for secured.
Austria's economy is closely intertwined with that of Italy. The banks give to their outstanding debts to the southern neighboring country with 16.5 billion euros. Bank Austria, a daughter of Milan and UniCredit Austria's largest institute, was downgraded by rating agencies already.
The Italians do not make it to calm the situation, according Felderer Austria also had a serious problem: "It may happen that Austrian bonds will be bought less frequently, which means in this country expensive interest rates on government debt," he said.
In two weeks, Moody's analysts to come to Vienna to assess the situation on the ground. Felderer considers it possible that Austria would put on negative outlook in this review. Of the six euro area countries that have a triple-A, was previously the position of France as the most vulnerable, because the country's banks had failed inversed strong in Greek bonds. If there is a downgrading of France and Austria, is also the good rating of the euro bailout EFSF risk.
In order to reassure the financial markets, the government plans to introduce a debt brake in Vienna soon after the German model. "The negotiations go," said a government spokesman. Claus Raidl, Board President of the Austrian National Bank requires an additional tightening of austerity. According to his calculations, the national debt by 2012 will rise by another two percentage points to more than 74 percent of the gross domestic product. If you add the debt of railway companies and other state facilities are included, thus 85 percent next year and 87 percent.
Read more about the "debt brake" plan here.