Moody’s downgrades Spanish regions

Currencies Direct October 23rd 2012 - 2 minute read

Eurozone debt rose to another
record high last year according to official figures from Brussels’
yesterday.  Overall the sizes of deficits were reduced but
countries were still adding billions of Euros to their debt piles.
The level moved to 87.3 per cent of GDP within the Eurozone, up
from 85.4 per cent in 2010, and 70.2 per cent back in 2008.The
extent of Eurozone states’ shortfalls reduced somewhat to a
combined level of 4.1 per cent of GDP, from 6.2 per cent in 2010 –
however this still meant an extra €390.7bn government debt.
Elsewhere the broader European Union area, only six countries saw
their level of debt as a percentage of GDP fall from 2010 to 2011,
while 21 saw it worsen. In spite of Chancellor George Osborne
promising a reduction in government spending, the UK’s shortfall
continued to be one of the largest in Europe. Leaving Ireland,
Greece and Spain logged a greater annual deficit that the UK
.Compare this with the  powerhouse economy Germany, which
dropped its budget deficit less than 1% of GDP in 2011 from 4.1 per
cent in 2010 and its debt fell to 80.5 per cent of GDP from 82.5
per cent. Finally, EU members Sweden, Hungary and Estonia succeeded
to stop the trend and record budget surpluses in 2011, even with
the on-going economic decline across most of the Euro region.

In other European news Moody’s the
rating agency has cut the debt ratings of five Spanish regions,
following the decision to keep its rating on Spain at one level
above junk last week. The areas included: Andalucia, Extremadura,
Castilla-La Mancha, Catalunya and Murcia who have seen their
ratings dropped by one or two notches thanks to “very limited cash
reserves… and their significant reliance on short-term credit lines
to fund their operating needs”, according to Moody’s.

This morning, Sterling temporarily
dropped below the key psychological level of 1.60 dropping to
1.5996. The pounds movements will be interesting to watch on the
run up to the much anticipated GDP figure which comes out on
Thursday which should prove the UK is officially out of recession.
The figure will be flattered by the automatic rebound from the lost
working day due to the Queen’s Diamond Jubilee in June and the
addition of Olympic ticket sales. The ONS has estimated that the
extra bank holiday wiped 0.5pc off growth in the second quarter and
the ticket sales will add 0.2pc to growth in the third quarter.

Today is a quiet day in terms of
headline data with only the Canadian Interest rate decision this
afternoon of note which is expected to remain at 1%. This number
comes ahead of the US rate decision on Wednesday and as mentioned
earlier the UK’s GDP number on Thursday morning.

Written by
Currencies Direct

Select a topic: