Another Downgraded Economy - Wealth Cycles Blog

Sep20

http://wealthcycles.com/blog2011

Another Downgraded Economy - Wealth Cycles Blog

Just a little more than a month after stripping the United States of its coveted credit rating, Standard & Poor's has set its focus on struggling European debt addicts, downgrading the third largest economy in Europe—Italy. The cut was made with negative outlook, meaning that Italy will face further cuts soon if things don’t turn around, and, let’s face it—things aren’t turning around any time soon despite Italy’s best attempts to unveil a brand new austerity program.

Even despite the European Central Bank’s buying Italian bonds to drive down interest rates, Italian borrowing costs have risen steadily. With the third largest bond market in the world (second only to the U.S. and Japan), its downgrade is significant. The Financial Times reported the story early thismorning:

“It also raised its estimates for Italy’s debt levels, assuming they would peak next year at 122.4 per cent of GDP, the second-highest in the eurozone behind Greece. Under its negative scenario, Italy would slip into a recession next year with debt to GDP peaking at 123.9 per cent. ...........

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