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Posts Tagged ‘Standard & Poor’

It’s the Denominator, Stupid!

February 25, 2013 1 comment

This weekend’s news was the downgrade of the UK by Moody’s. Chancellor Osborne took this as a sign that austerity should be strengthened even more, probably because he had little choice (never put all your eggs in one basket…). And yet, if only somebody in Downing Street bothered going through the text, they would have read this:

The key interrelated drivers of today’s action are:
1. The continuing weakness in the UK’s medium-term growth outlook, with a period of sluggish growth which Moody’s now expects will extend into the second half of the decade;
2. The challenges that subdued medium-term growth prospects pose to the government’s fiscal consolidation programme, which will now extend well into the next parliament;
3. And, as a consequence of the UK’s high and rising debt burden, a deterioration in the shock-absorption capacity of the government’s balance sheet, which is unlikely to reverse before 2016.

Thus, Moody’s analysts clearly state the direction of causality: Read more

Austerity is not Enough

February 10, 2012 1 comment

OFCE le blog has posted the English translation of an article I wrote with André Grjebine a few weeks ago, for the French daily Le Monde. We commented the Standard & Poor’s  downgrades, developing the points I had made here.

I maintain that the motivation of S&P marks a turning point in the debate on EMU governance. It was the first time that a major market participant explicitly challenged the priorities that the German leadership is imposing to Europe.

The current discussion on the Greek austerity plan shows that markets are joining those who preach to the desert.

Standard & Poor’s Joins the Herd

January 16, 2012 3 comments

Standard and Poor’s decision to downgrade a large number of EU countries, on Friday, was widely expected; and, as I write, markets barely reacted. This is not surprising, as the downgrade had already been embedded in market behaviours.

There are of course notable political consequences, for example in what concerns the French presidential race.  But from an economist perspective, this is really not a turning point.

There is nevertheless a remarkable news, that went almost unnoticed. Read more…