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UBS exec sees as 'inevitable' loss of top grade amid crisis
Source: Bloomberg News |
December 13, 2011, Tuesday
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GEORGE Magnus, senior economic adviser at UBS AG, said an AAA rated European country will lose its top grade after the region's leaders failed to tackle the crisis at a summit last week.
"I think it's inevitable," Magnus said in a interview with Maryam Nemazee on Bloomberg Television in London yesterday. "It's just a question of when S&P or the other rating agencies decide to pull the trigger."
Standard & Poor's placed the ratings of 15 euro nations, including AAA rated France and Germany, on review for possible downgrade on December 6 pending an assessment of the summit. Moody's Investors Service said yesterday it will review the ratings of all European Union countries after the December 6 meeting in Brussels failed to produce "decisive policy measures" to end the region's debt turmoil.
The discussions ended with a blueprint for a closer fiscal union and tighter rules on borrowing, and a faster start to a 500 billion-euro (US$663 billion) rescue fund. Magnus said the proposals fail to "address the immediate crisis."
"We need to find ways to appease the rating agencies and investors, you have to find ways of improving the prospective of solvency in the sovereign space and of engineering something that actually gets people a little bit more comfortable with the idea of accepting eurozone financial instruments," he said. "I'm afraid this pact does nothing to do either of those."
Investors have turned on the bonds of Europe's most indebted nations, pushing up yields for borrowers such as Greece and Italy. Eurozone governments have to repay over 1.1 trillion euros of long- and short-term debt in 2012, with about 519 billion euros of Italian, French and German debt maturing in the first half alone, data compiled by Bloomberg show.
"I think it's inevitable," Magnus said in a interview with Maryam Nemazee on Bloomberg Television in London yesterday. "It's just a question of when S&P or the other rating agencies decide to pull the trigger."
Standard & Poor's placed the ratings of 15 euro nations, including AAA rated France and Germany, on review for possible downgrade on December 6 pending an assessment of the summit. Moody's Investors Service said yesterday it will review the ratings of all European Union countries after the December 6 meeting in Brussels failed to produce "decisive policy measures" to end the region's debt turmoil.
The discussions ended with a blueprint for a closer fiscal union and tighter rules on borrowing, and a faster start to a 500 billion-euro (US$663 billion) rescue fund. Magnus said the proposals fail to "address the immediate crisis."
"We need to find ways to appease the rating agencies and investors, you have to find ways of improving the prospective of solvency in the sovereign space and of engineering something that actually gets people a little bit more comfortable with the idea of accepting eurozone financial instruments," he said. "I'm afraid this pact does nothing to do either of those."
Investors have turned on the bonds of Europe's most indebted nations, pushing up yields for borrowers such as Greece and Italy. Eurozone governments have to repay over 1.1 trillion euros of long- and short-term debt in 2012, with about 519 billion euros of Italian, French and German debt maturing in the first half alone, data compiled by Bloomberg show.
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