EU Credit Rating Cut By S&P

12/20/13 11:02AM EST

EU Credit Rating Cut By S P EU Credit Rating Cut By S&P

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The European Union has lost its across-the-board AAA credit rating. Standard and Poor’s downgraded debt from the political conglomeration this morning as the continent continues to have trouble in the face of financial instability and ongoing political problems. According to the ratings agency, the EU shows overall weaker credit-worthiness. That’s the reason for today’s downgrade.

The downgrade comes just days after Europe celebrated Ireland as the first country to leave the IMF/EU bailout program. The continent’s politicians are also just after agreeing a banking deal that is designed to shore up some of its problems with financial instability. Standard and Poor’s now rates the Eu’s debt at AA+, one notch below top-grade.

European Downgrade

The downgrade of European Union debt has been expected for a long time, despite the efforts of central European leaders to avoid the branding of the continent as less than stable. German efforts to continue shoring up the finances of peripheral member states are continuing, but problems at the old core are emerging. France’s financial ability is now in question, and the country’s political stability is once again difficult to assess.

“We believe the financial profile of the E.U. has deteriorated, and that cohesion among E.U. members has lessened,” was the opinion of Standard and Poor’s in the statement it released this morning. The danger of Europe becoming a less strict political union is constantly hitting investors in the continent. Great Britain is the most important of the several countries attempting to break away from certain strictures of the EU, and those efforts may serve to destabilize the whole.

Europe Aims For Stability

The European Union is on the last day of a meeting of officials and heads of State. The group agreed to the formation of a banking deal at the meeting, but the announcement did not shift the opinion of the Standard and Poor’s analysts. Europe is trying to convince the world that it is creating a tighter economic an political union with its banking deal, and it is trying to demonstrate the efficacy of IMF austerity policies by painting Ireland as a reformed nation.

Both of these exercises are built on PR as much as they are on the actual facts. The banking union is an incremental increase in the power of European technocrats over the nations in the Eu, Ireland may have left the IMF bailout, but the country’s banking system is not healthy, and ECB head Mario Draghi reckons the country needs some form of second bailout in order to ensure stability.

Europe is by no means stable and though the continent may seem to be in recovery, it is Germany that is doing the growing. Peripheral states are still depressed under the weight of hefty deficits and austerity deals. With France and Italy now included in the periphery, it seems that the continent is in more trouble than it’s out of. Standard and Poor’s is watching these trends, and it’s clear that optimism is several steps away.

 
 
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