Rebel Traders – Analysis Without The Hype

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S&P LOWERS GREEK SOVEREIGN RATINGS ONE NOTCH TO BBB+ FROM A-;  OUTLOOK IS NEGATIVE

The downgrade reflects S&P’s opinion that the measures the Greek authorities have recently announced to reduce the high fiscal deficit are unlikely, on their own, to lead to a sustainable reduction in the public debt burden. Moreover, S&P believes that the government’s efforts to reform the public finances face domestic obstacles that would likely require sustained efforts over a number of years to overcome.

S&P expects double-digit general government deficits as a percentage of GDP this year and next to raise Greece’s government debt burden sharply, to 126% of GDP in 2010 and around 138% of GDP in 2012. In S&P’s view, the increasing debt-service burden narrows the scope for debt stabilization, particularly against the background of what it expect will be a significantly weaker near-term economic growth environment.

The CreditWatch placement reflects S&P’s view that the ratings could be further lowered if the government is unable to gain sufficient political support to implement a credible medium-term fiscal consolidation program. [...]

[...] If political considerations and social pressures hamper progress in establishing a framework for containing the debt burden, we could lower the ratings further. On the other hand, if over the next three to four months Greece successfully implements a plan that includes deficit-reducing measures or other economic reforms that could lead to a sustained improvement in the debt trajectory, the ratings could be affirmed.

As the United States continues to spend money it does not have it requires that the federal debt ceiling to be raised once again. But raising the federal debt limits is something that never goes over well with the public. With elections in 2010 what does Congress do if they don’t want to raise the debt ceiling at a time when they will be running for re-election? They do it now and do it in a big way so they don’t have to do it during the elections.

Shhhhhh, come here (whispering) – they hope you will forget all about this when they ask for your votes next year.

In a bold but risky year-end strategy, Democrats are preparing to raise the federal debt ceiling by as much as $1.8 trillion before New Year’s rather than have to face the issue again prior to the 2010 elections.

“We’ve incurred this debt. We have to pay our bills,” House Majority Leader Steny Hoyer told POLITICO Wednesday. And the Maryland Democrat confirmed that the anticipated increase could be as high as $1.8 trillion — nearly twice what had been assumed in last spring’s budget resolution for the 2010 fiscal year.

The leadership is betting that it’s better for the party to take its lumps now rather than risk further votes over the coming year. But the enormity of the number could create its own dynamic, much as another debt ceiling fight in 1985 gave rise to the Gramm-Rudman deficit reduction act mandating across-the-board spending cuts nearly 25 years ago.[...]

[...]Last spring, the Democratic-backed budget proposed to raise this to about $13 trillion, but given the current pace of borrowing, no one now expects that will be sufficient to get through 2010.[...] Source: Politico

A debt ceiling of nearly $14 Trillion bucks. And what did President Obama say yesterday? “We will spend our way out of this recession”. Fiscal responsibility? Not in Washington anymore, and people wonder why it is that the risk of the United States losing the prized AAA sovereign rating is hanging over the nation.

This evening Fitch Ratings issued a statement that the AAA sovereign rating of the United Kingdom is the most at risk to lose that sovereign rating. Fitch also stated that Japan is being watch carefully and Fitch is concerned about Japan issuance of JGB which would prompt a rating review.

The United States rating will come under additional pressure if “US fiscal position does not stabilize”

RT note: You hear that Geithner and Bernanke? You just got a shot across the bow. Get the deficit under control or go down with the ship.

Tonight Fitch Ratings has issued a statement that the sovereign rating of New Zealand is in jeopardy.

Fitch lowers New Zealand’s sovereign outlook to Negative from Positive; rating affirmed at AA+