Italy’s Sovereign Credit Rating Crushed By Moody’s
The largest of the so-called PIIGS nations ( those members of the European Monetary Union most impacted by the sovereign debt crisis plaguing the Eurozone) is Italy. Moody’s Investors Service has just handed the government in Rome a wet blanket of bitterness. Italian sovereign debt has been downgraded by Moody’s two notches, from A3 to a level barely above junk bond status, Baa2. No matter how artfully the politicians in the Eurozone spin the news, this is a clear manifestation by the market of complete lack of faith in the credit worthiness of the largest PIIGS nation.
Putting the latest downgrade in perspective, it is clear that the contagion stemming from the Eurozone debt crisis was never contained in Greece, or subsequently ring-fenced in Ireland and then Portugal by massive taxpayer-funded bailouts. It’s clear that this devastating sovereign debt crisis is now corroding the fiscal life of Spain and Italy, and bear in mind that not even all the printing presses of the European Central Bank can impede the coming revolt of the bond vigilantes. We are facing a sovereign debt crisis, not a liquidity crisis, and money printing by central bankers is as useful in such a crisis as are water pistols in an artillery duel.
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