S&P Downgrades Add Further Strain on Europe

Standard and Poor’s didn’t shy away from issuing en masse downgrades to 9 countries in Europe after months of warnings. In other words, Europe is on thin ice and will have to act fast before its unified economic foundation breaks into fragmented pieces.

In this week’s video, managing director of sovereign ratings at S&P, John Chambers, presents a breakdown of the downgrade decisions as well as what’s at stake for Europe in the near future.

Doubts remain as to whether countries such as Italy, Portugal, and Spain can successfully implement austerity measures and reduce their fiscal deficits while financing their massive debt loads. Given these downgrades where Italy is now non-investment grade while Portugal has hit junk status, attracting investors will be difficult, which should increase borrowing costs.

Meanwhile, the efficacy of the EFSF is still uncertain as to whether it will help the Eurozone. Unfortunately, outside funding via the IMF and others is becoming more of a reality as the contagion worsens.

We’ll just have to see if markets react more negatively on Tuesday especially with talks in Greece breaking down.

About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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