Monday, December 05, 2011

S&P Europe warning on downgrade as expected

S&P issued its rumored report which warned of downgrading European sovereign debt after the market closed. Technically it didn't "downgrade" European sovereign debt yet, but put it "on CreditWatch with negative implications", meaning that they estimate that there is greater than a 50% chance that any of the sovereign debt countries will be downgraded within 90 days. Specifically they said:
Standard & Poor's Ratings Services today placed its long-term sovereign ratings on 15 members of the European Economic and Monetary Union (EMU or eurozone) on CreditWatch with negative implications.
As I said earlier, no significant new news here. Europe has problems that they need to address in reasonably short order.
 
S&P will make a decision as to doing any actual downgrading after they complete a review "as soon as possible following the EU summit scheduled for Dec. 8 and 9, 2011."
 
How likely is a downgrade? S&P's methodology says: "Standard & Poor's will place a rating on CreditWatch if we determine that there is at least a one-in-two likelihood of a rating change within 90 days." So, at least a flip-a-coin chance.

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