These are dark days in Portugal. And, unfortunately, the latest news is probably a omen of things to come for the United Sates.
Moody’s has downgraded the Iberian basket case’s long-term government bond ratings. What was Baa1 is now to Ba2. And to make matters even worse, the outlook was downgraded to negative. The government’s short-term debt rating was also downgraded to (P) Not-Prime from (P) Prime-2.
What prompted the downgrades? Two things:
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Do you remember when the housing decline first appeared on the radar screen a few years ago, and all the “experts” told us that it would be contained to certain states? Then, when the subprime loan crisis hit, these same experts told us that the it would be contained to only subprime loans. Later, when Lehman fell, the experts again told us the banking problems would be contained as well.
The “experts” are once again dead wrong on another issue about to be “uncontained.” Now we’re being told that the Eurozone sovereign debt issues will be contained to the problem countries like Greece, Portugal and Ireland. Not only will Europe as a whole be just fine and dandy in the end, but so will the United States (which is quickly becoming a synonym for Greece).
Endgame author John Mauldlin, one of my favorite reads on Europe’s problems, begs to differ. Here he is in this video with Aaron Task of The Daily Ticker.
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The European Union wants to put the sovereign debt crisis behind them, but Portugal is not cooperating. The EU has a bailout program for them, but the austerity measures Portugal would be required to take look likely to be defeated this week.
Portugal’s main opposition parties told the beleaguered minority government they won’t budge from their refusal to endorse a new set of austerity measures designed to ease a huge debt burden that is crippling the economy.
The new steps are likely to be rejected in a parliamentary vote expected Wednesday and the timing could not be worse. A defeat in the vote, Prime Minister Jose Socrates warned, would trigger his government’s resignation, consigning Portugal to at least two months of political limbo just as officials were hoping to boost investor confidence in the country’s future.
Source Yahoo! Finance.
The Middle East revolutions and protests and nocked the Eurozone sovereign debt problems off the radar lately. But rest assured, the problems are still there and they are getting worse. Here’s Reuters reporting from Brussels today:
Feb 17 (Reuters) – European Union member states are increasingly concerned about Portugal’s ability to fund itself in financial markets and believe Lisbon will have to seek a bailout by April, a euro zone source said on Thursday.
The EU has a rescue plan ready for Portugal, but it is dependent on Lisbon asking for the aid and making that request to both the EU and the International Monetary Fund. Portugal remains adamantly opposed to asking for assistance.
“Portugal is drowning. It’s not going to be able to hold on beyond the end of March,” the euro zone source said. “That’s already understood to be the case in financial markets, but now it’s also understood among (EU) finance ministers.”
Max Keiser, in commenting on WSJ article, Portuguese Banks Face Downgrade ($), said:
The pattern is the same. The rating agencies downgrade. The bond assassins start selling sovereign debt with naked (counterfeit) short-sales. The politicians start talking austerity. The IMF is called in to steal the country’s assets. This organized crime racket has been active in Central and South America for decades (read John Perkins, “Confessions of an economic hit man”). And we’ve seen this technique used on Wall St. for just as long as one company targets another with a ‘leveraged buy out’ (buying another company by pledging the assets of the company being taken over as the basis for a loan big enough to swallow the company). Now we are seeing this in Western Europe and the folks in the U.S. who have been insulated from this predatory financial terrorism are getting a taste of it first hand. There is no end for the suicide bankers. They will continue like this until every economy they can find has been stripped and left for dead.
This quote ties in with the earlier post on Keiser’s comments on the IMF.