Global Economic Crisis

Continuing a two year trend that has seen the once AAA rating of French sovereign debt reduced, the ratings agency S & P announced it is cutting its rating on government debt from Paris to AA.  This decision flows from the moribund state of the second largest economy in the Eurozone, which is suffering from high unemployment, large public deficits and a failure to engineer strong economic growth.

The government of French President Hollande came to office on a pledge to create new jobs by defying the austerity trends of other Eurozone partners, in part to be financed by higher taxes. The populist message of Hollande, once translated into public policy, has failed to lift the French economy, and notwithstanding the boasts of politicians in Hollande’s administration, S & P clearly sees sovereign debt issued by France as being less credit worthy in the wake of current fiscal and economic policies.

In the meantime, the European Central Bank, which under its president, Mario Draghi, has followed in lockstep with the Fed’s Ben Bernanke in implementing a near zero interest rate policy (ZIRP), has just cuts its interest rate from half a percent to a quarter of a percent. The most recent rate reduction by the ECB, in conjunction with S & P’s lowering of France’s credit rating, demonstrates that the fiscal and economic woes in the Eurozone are far from over. The Eurozone crisis continues.

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Hillary Clinton Nude

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HILLARY CLINTON NUDE

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Wall Street Kills-Official Trailer

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Another wave of credit downgrades has hit the Eurozone. S & P cut the credit worthiness of several European sovereigns, most conspicuously France, which saw its coveted AAA rating reduced to AA plus.  Austria also lost its AAA rating, and Italy was reduced by two notches, now being rated by Standard & Poor’s at BBB plus.

Predictably, French Finance Minister Francois Baroin said “It’s not good news, but it’s not a catastrophe.” A statement of self-contradicting spin that will be unlikely to arouse confidence among sovereign wealth funds and private investors. But perhaps most alarmingly, with Germany now the only Eurozone economy retaining a AAA credit rating, and the German economy having contracted in Q4 of 2011, all these downgrades and somber economic trends undermine the supposed savior of the insolvent Eurozone countries, the so-called European Financial Stability Facility. How will the EFSB sell its bonds to generate capital lend to the fiscally most vulnerable members of the Eurozone? Things are looking increasingly gloomy in Europe, with no resolution for the sovereign debt crisis or economic downturn in sight. And yet, the politicos are still banking on the European Central Bank and its printing press as the savior of last result. What a thin reed to base hope of an economic miracle on.