Egan-Jones has just dropped the proverbial hammer again on Spain, downgrading the nation from CC+ to double hooks.
Apparently the wealthy Catalonia threatening to succeed from Spain is not positive for Spanish debt. Who’da thought?
In other news, Moody’s, Fitch, and S&P executives were seeing playing another round 18 with Obama this afternoon.
h/t ZeroHedge:
Hoover-esque. Spain’s has unemployment near 25% and yet the govt is proposing tax increases and a raiding of social security funds in an effort to rein-in its budget deficit. (The deficit was 4.77% for the first 8 months.) The rub is whether Spain will be able to cut enough to obtain EU support (probably) and whether there will be an eventual haircut for current debtholders (probably). Catalonia, Valencia and other regions will probably need $20B of aid, the sen. debtholders of the weak banks will be forced to take losses, and there might be some sharing of losses among all banks. An estimated decline in GDP of 1.7% (per the Economy Ministry), the IIF’s recent estimate of addl bank loan losses up to EUR260B, and depositor flight hurt. From 2008 to 2011, Spain’s debt jumped from EUR436B to EUR735B while its GDP declined from EUR1.09T to EUR1.07T.
Social benefits are a prob; while pmts to the govt have been more or less flat over the past four years (up EUR 3B), payments from the govt. have been up EUR 45B. As a result, Spain is short about EUR50B per year for social payments, EUR20B per year for interest, and an addl EUR 20B for asset growth; hence the EUR90B per annum increase in debt. Spain will inevitably be faced with addl pmts to support a portion its banking sector and for its weaker provinces. Assets of Spain’s largest two banks exceed its GDP. We are downgrading our rating to “CC”.
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In other news, Obama was seen playing a fiddle….
“In other news, Obama was seen playing a fiddle….”
As ALL of America burned? :-(
Wait until they downgrade the US’s credit rating that far.
The US credit rating would already be in the toilet IF the game wasn’t rigged.
As a simple exercise, I once set up a financial analysis of the US as if it was a person. Not only would I never loan money to someone so financially irresponsible, none of the local banks would either. That told me right there and then that the true US credit rating was BBB at best and perhaps B at worst. In either case, such a person should NOT be borrowing ANY more money!
yawn wake me up when they reach zzz
max
Ed B
it would almost be funny if it wasn’t so true. I’ve loaned money to a few dead beats before. Paid back? Nah. No chance. The sad thing is our country has become just like those deadbeats.
We’ve convinced the world that we are a good risk. The world is rapidly waking up to that fact that not only is that Uncle Sam is the world’s biggest deadbeat, he’s never going to pay up. He’s just going to dump the debt on us because we were conned into cosigning for his bad loans.
I read that you took your Social Security at 62. That’s a great plan. My wife is going to do the same and I promised her that I would buy an equal amount of silver so she could keep the income herself. Unless silver is $200 an ounce and then we will have to renegotiate that agreement. Her silver stack is as bigger than mine.
Awww, where’s Sterling? Doesn’t he usually graze on popcorn while bond ratings drop?
In my opinion, all the western countries will continue to be downgraded to the lowest grades by Egan-Jones since they all have bad economies and their collapse is inevitable.