U.S. credit ratings giant Standard & Poor's (S&P) lowered its rating on the credit-worthiness of nine European nations January 13. "It's not the cut in the rating that is historic," BNP Paribas economist Dominique Barbet told the Wall Street Journal. "It's the depth of the euro crisis that is historic."
"We have lowered the long-term ratings on Cyprus, Italy, Portugal, and Spain by two notches," S&P noted in a press release, and also "lowered the long-term ratings on Austria, France, Malta, Slovakia, and Slovenia, by one notch." The change for Portugal brings the nation's debt to junk bond status at BB; a rating of at least BBB- is needed for investment-grade debt.
S&P wrote that the lowered ratings on sovereign debt were because of "fiscal profligacy" and poor government plans to curb that profligacy. "The policy initiatives that have been taken by European policymakers in recent weeks may be insufficient to fully address ongoing systemic stresses in the eurozone," Standard & Poor's said, stressing that "the agreement is predicated on only a partial recognition of the source of the crisis: that the current financial turmoil stems primarily from fiscal profligacy at the periphery of the eurozone."
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