Current Magazine

Italy Credit Downgrade Sparks Fresh Eurozone Recession Fears

Posted on the 05 October 2011 by Periscope @periscopepost
Italy credit downgrade sparks fresh eurozone recession fears

Flags at the European Parliament's Robert Schuman building. Photo credit: Tristam Sparks

The debt crisis shows no signs of abating, with Italy the latest eurozone country to hit the financial headlines. Italy’s credit rating was cut this week by Moody’s credit rating agency, having already weathered a cut last month by Standard and Poor’s (S&P). Prime Minister Silvio Berlusconi criticised the S&P cut at the time as “dictated more by newspaper stories than by reality”, according to Dominic Rushe in The Guardian. But as share indexes drop, a general strike begins in Greece and the voices predicting recession get even louder, just how bad is the situation?

Bad timing. According to Robert Peston at the BBC, Italy’s downgrade “could not have come at a worse time for the eurozone.” Peston suggested that the most alarming potential effect is that Italy’s banks would find it more difficult to borrow money, as the Italian government would not be perceived as strong enough to support them in case of crisis. Given the ministers are increasingly recognising the importance of shoring up European banks, he argued, this was a worrying possibility.

Unsurprising. Writing for The Wall Street Journal MarketBeat blog, Mark Gongloff suggested that the effect of Italy’s latest downgrade on financial markets may be “muted”, due to the fact that the cut had been expected for several months. Indeed, European stock markets have rallied since the announcement.

Who’s next? Sam Fleming and Gary Parkinson reported for The Times (£) that Moody’s has warned more eurozone governments faced the prospect of downgraded credit ratings. What’s more, Goldman Sachs predicted a “mild recession” in the eurozone by the end of 2011.

Same old, same old. Writing for The Guardian, Larry Elliott argued that share prices dropping and teetering banks have become “the new normal” – although at the same time, he said, the uncertainty surrounding the future of world finance means the situation “is not really normal at all.” Elliott focussed his attention on Greece’s instability, setting out the “doomsday option” that the country would ditch the euro, leading to the end of the monetary union. European governments would have only themselves to blame in this scenario: “It is now the best part of two years since the Greek debt crisis began, two years in which the problem was denied, ignored and downplayed,” he wrote.

Politics, not economics. John Quiggin and Henry Farrell insisted at The Daily Beast that Europe’s woes are due to politics rather than economics. Quiggin and Farrell suggested that the only solution is to make the continent fully politically integrated, with new institutions including “a new European Senate, with veto power” and “a beefed up European Commission with the power to initiate legislation.”


You Might Also Like :

Back to Featured Articles on Logo Paperblog

These articles might interest you :

  • Black Feather American Bourbon Whiskey Review

    Black Feather American Bourbon Whiskey Review

    When I first heard about Black Feather American Bourbon Whiskey I dismissed it as a nothing more than a branding stunt put together by a couple of extreme sport... Read more

    The 18 September 2018 by   Josh Peters
    DRINK
  • 7 Best Xbox One Emulator for Windows PC [Xbox Games on PC] 2018

    Have you ever wondered how you could play video games from gaming consoles to your PC? Atari, an arcade gaming company released the first video gaming console,... Read more

    The 18 September 2018 by   Meet Rv
  • Cottage - I Belong in a Crofter's Cottage

    Cottage Belong Crofter's

    Isle of Barra There’s something very appealing about escaping to a crofter’s cottage in the north of Scotland. It is good for me to break away from the rat... Read more

    The 18 September 2018 by   Ashleylister
    BOOKS, CREATIVITY, CULTURE, SELF EXPRESSION
  • Help Me Celebrate!

    Help Celebrate!

    by NinaTomorrow is the 7th anniversary of the Yoga for Healthy Aging blog. Whoa, it's actually hard for me to believe it. When I started the blog seven years ag... Read more

    The 18 September 2018 by   Ninazolotow
    FITNESS, HEALTH, HEALTHY LIVING
  • Spoiler Alert | The CW Releases More ‘Arrow’ Premiere Images

    Spoiler Alert Releases More ‘Arrow’ Premiere Images

    “Green is the new black.” – Stephen Amell More photos from Arrow’s season 7 premiere episode, titled Inmate #4587, have been released, and these are all about... Read more

    The 18 September 2018 by   Entertainmentjolt
    ENTERTAINMENT, TV & VIDEO
  • Disrupt Facebook!

    Disrupt Facebook!

    A business model is a plan for the successful operation of a business, identifying sources of revenue, the intended customer base, products, and details of... Read more

    The 18 September 2018 by   Thinkibility
    BUSINESS, LIFE COACH
  • Carolina Strong & Have You Marked Yourself Safe?

    Carolina Strong Have Marked Yourself Safe?

    Still getting through Hurricane Florence here in the Carolinas. While I live in central NC, we have had our share of flooding, trees down, power outages and yes... Read more

    The 18 September 2018 by   Midlifemargaritas
    LIFESTYLE

Paperblog Hot Topics