After the U.S. market close yesterday, September 19, Standard & Poor’s cut Italy’s credit rating to A from A+. And the company kept its negative outlook, meaning that Italy faces a one in three chance of another rating downgrade within the next two years, according to Standard & Poor’s.
Right about now, today, September 19, Greek Finance Minister Evangelos Venizelos is scheduled talk to officials of the International Monetary Fund and the European Union by conference call in an effort to convince them that Greece can meet its deficit reduction goals and that they can approve the next $11 billion payment Greece needs to keep the doors open.
It’s not only that the Greek economy is shrinking faster than expected when the austerity package was put together—projections now call for GDP to shrink by 5%. But also that the Greek government is clearly unable to deliver the goods even when it enacts measures that would increase revenue.
The news flow from Europe in September is full of deadlines and threats. It’s hard for me to see global financial markets finding their footing until this giant bulge of unsettling news has passed through the anaconda.
While the headlines are blaring news of the Greek debt deal, the French CAC 40 index was up just 0.2% as of 10:15 a.m. New York time. The German DAX index was down 0.02%. The wider Euro Stoxx 50 had inched up just 0.01%. Why not more excitement?
Unless your standard for breakthrough is set so low that getting German Chancellor Angela Merkel to attend today’s European emergency summit meeting fits the bill, I’d call what emerged from the talks between Merkel and French President Nicolas Sarkozy more of a shopping list.
Over the weekend German Chancellor Angela Merkel and European Central Bank head Jean-Claude Trichet dug in their heels on apparently irreconcilable positions inching the European monetary union closer to total political failure.
The European Central Bank raised its benchmark interest rate today, July 7, by 0.25 percentage points to 1.5%. Because the move was so widely expected, financial markets have reacted favorably but not strongly. But there were surprises—small and big—in the announcement.
