GREECE SLIDES

I make no apologies for coming back to this topic - the periphery Eurozone countries are going to be in the news quite a bit over the coming months.

The interesting thing to note about Moody's latest downgrade is that there is an evens-chance of a default on Greece's sovereign debt.

Although Moody's says that it doesn't think that Greek debt restructuring is inevitable, it is curious that of all the Caa1- rated insitutions, within a five-year period, 50% have defaulted. 

Many in the media have concentrated on the fact that Greece is now at the bottom of the league table with a worse credit rating than Montenegro, but is this the first time that the odds have significantly foreshortened for the worst from a ratings agency?

A LOAD OF BANKERS...

had an interesting breakfast this morning - although I suspect not as interesting as certain footballers had - after Moody's announced it may downgrade their credit status after a review.

The downgrades are to do with the UK government and regulators shutting the public purse and saying, basically, you fail it is up to you, your bondholders, and your sector to sort it out.

This is not to do with how credit-worthy, that is "are you good for your loan?", banks are, and so far it appears that the FTSE thinks banks are, good for their debt with shares only falling a tad as news came out of the possible downgrades.

Which makes you think: So how powerful are rating agencies?

OK, in the next Financial Risks Today, you will see that even rating agencies admit that they made mistakes but the opprobrium they have had appears to miss the point that investors should be making decisions holistically rather than solely on a ratings note.

In addition, politicians should reign their necks in a bit. It is their policies that are leading to sovereign debt downgrades, it is their policies that are preventing any sign of recovery for indebted Eurozone countries and it is their policies that could see the entire Euro project fail.

It is because of their policies that rating agencies see fit to downgrade their countries.