A double-notch downgrade to Spain’s credit ratings has piled more pressure on European leaders to make rapid progress on solving the region’s debt crisis or face unbearable borrowing costs.
The fresh blow from Moody’s Investors Service came just a day after the agency warned France its “Aaa” rating could be at risk.
“If the eurozone can’t figure a way to handle the situation, you are going to see Spanish yields continue to go up and they are going to have a problem to fund themselves,” said Jessica Hoversen, currency and fixed income analyst at MF Global in New York.
Investors are counting down to a summit of EU leaders this weekend that was originally hailed as a watershed event.
Moody’s cut Spain’s bond rating to “A1,” from “Aa2,” the third of the major agencies to act in recent weeks and taking it a notch below the ratings of Standard & Poor’s and Fitch.
The ratings agency’s reasoning made worrying reading for those hoping for a speedy resolution to the country’s troubles.
“Since placing the ratings under review in late July 2011, no credible resolution of the current sovereign debt crisis has emerged and it will in any event take time for confidence in the area’s political cohesion and growth prospects to be fully restored,” the agency said.
In the meantime, Spain’s large sovereign borrowing needs, heavily indebted banking system and challenging growth outlook left it vulnerable to further downgrades, a judgement that would encompass all too many of EU members.
Markets have been on edge for fear European leaders would not agree on a plan to address the crisis, which has already forced Greece, Ireland and Portugal to seek bailouts and has driven up borrowing costs in Italy and Spain.
Greek unions began a 48-hour general strike yesterday, the biggest protest in years, as parliament prepares to vote on sweeping new austerity measures designed to stave off default.
France saw its borrowing costs jump on Tuesday after Moody’s warned it might slap a negative outlook on the country’s “Aaa” rating in the next three months if slower growth and the costs of helping to bail out banks stretch its budget too much. French Finance Minister Francois Baroin said the rating was not at risk.
DIVIDED VIEWS: Although the Fed agreed on holding rates steady, some officials see no rate cuts for this year, while 10 policymakers foresee two or more cuts There are a lot of unknowns about the outlook for the economy and interest rates, but US Federal Reserve Chair Jerome Powell signaled at least one thing seems certain: Higher prices are coming. Fed policymakers voted unanimously to hold interest rates steady at a range of 4.25 percent to 4.50 percent for a fourth straight meeting on Wednesday, as they await clarity on whether tariffs would leave a one-time or more lasting mark on inflation. Powell said it is still unclear how much of the bill would fall on the shoulders of consumers, but he expects to learn more about tariffs
Meta Platforms Inc offered US$100 million bonuses to OpenAI employees in an unsuccessful bid to poach the ChatGPT maker’s talent and strengthen its own generative artificial intelligence (AI) teams, OpenAI CEO Sam Altman has said. Facebook’s parent company — a competitor of OpenAI — also offered “giant” annual salaries exceeding US$100 million to OpenAI staffers, Altman said in an interview on the Uncapped with Jack Altman podcast released on Tuesday. “It is crazy,” Sam Altman told his brother Jack in the interview. “I’m really happy that at least so far none of our best people have decided to take them
PLANS: MSI is also planning to upgrade its service center in the Netherlands Micro-Star International Co (MSI, 微星) yesterday said it plans to set up a server assembly line at its Poland service center this year at the earliest. The computer and peripherals manufacturer expects that the new server assembly line would shorten transportation times in shipments to European countries, a company spokesperson told the Taipei Times by telephone. MSI manufactures motherboards, graphics cards, notebook computers, servers, optical storage devices and communication devices. The company operates plants in Taiwan and China, and runs a global network of service centers. The company is also considering upgrading its service center in the Netherlands into a
NOT JUSTIFIED: The bank’s governor said there would only be a rate cut if inflation falls below 1.5% and economic conditions deteriorate, which have not been detected The central bank yesterday kept its key interest rates unchanged for a fifth consecutive quarter, aligning with market expectations, while slightly lowering its inflation outlook amid signs of cooling price pressures. The move came after the US Federal Reserve held rates steady overnight, despite pressure from US President Donald Trump to cut borrowing costs. Central bank board members unanimously voted to maintain the discount rate at 2 percent, the secured loan rate at 2.375 percent and the overnight lending rate at 4.25 percent. “We consider the policy decision appropriate, although it suggests tightening leaning after factoring in slackening inflation and stable GDP growth,”
RSS