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2 dominoes falling – Spain and Portugal

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I was wondering in my last post that Which will be the next domino to fall after Greece? I had my answer much earlier than thought and in plural.Earlier in the day Portugal shares were down on 6% on its debt being downgrade by S&P. The ratings agency which has been ranked as one of the main culprits of the credit crisis routinely labeling subprime debt issues to much higher grades is seemingly on a mission to exonerate itself by zealously downgrading countries in the last 2 days.The US markets are still slightly down as the market continues to think that this European problem will be contained. I can think of at least 5 problems that should make the markets go down more

1. Lower US exports to Europe because of a lower  Euro
2. No potential appreciation of the yuan to the dollar
3. Lower European demand because of even weaker European growth making for a case for even weaker US exports
4. Potential risk of similar debt downgrades for other countries like Italy,UK and Japan
5. Potential debt downgrade of US itself

S&P cuts Spain to ‘AA’ on weak economic growth – Marketwatch

Standard & Poor’s Ratings Services on Wednesday lowered Spain’s long-term sovereign credit rating to AA from AA+. “We now believe that the Spanish economy’s shift away from credit-fuelled economic growth is likely to result in a more protracted period of sluggish activity than we previously assumed,” said Marko Mrsnik, an S&P credit analyst. “We now project that real GDP growth will average 0.7% annually in 2010-2016, versus our previous expectations of above 1% annually over this period,” he added. Private sector debt, which is at 178% of GDP, and an inflexible labor market as well as low export capacity are all burdening Spain’s economic growth, according to the ratings agency. The outlook is negative

PG

Sneha Shah

I am Sneha, the Editor-in-chief for the Blog. We would be glad to receive suggestions, inputs & comments on GWI from you guys to keep it going! You can contact me for consultancy/trade inquires by writing an email to greensneha@yahoo.in

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