Jan. 16, 2012, 12:00 a.m. EST
From now on, in Europe, everything gets worse
Commentary: Downgrade divides euro zone into winners, losers
By David Marsh, MarketWatch
LONDON (MarketWatch) — A nightmare for France, Italy and Spain. A godsend for far-right nationalist parties across Europe. As the result of the Friday the 13th downgrades, everything gets much more difficult. The slow-motion train crash of economic and monetary union (EMU) has suddenly speeded up. The place in the film where the track breaks up and the railcars spill into the ravine cannot be far away.
The movie we’re watching is actually an old one. Each country is reverting to type. Standard & Poor’s removal of France and Austria from the AAA list, the downgrading of Spain, Italy and several other euro /quotes/zigman/4867933/sampled EURUSD -0.04% members, and the maintained top credit rating for Germany and the Netherlands confirms the “winner takes all” polarization within economic and monetary union.
The Germans become more self-righteous, because they fear that, if they stray from the path of orthodoxy, France’s fate will be theirs. The French become more fractious, the Italians more irritated, the Greeks more gruesome.
Turning the EFSF rescue fund into a usable financing vehicle will become immeasurably more challenging now that its AAA rating is melting away.
Watching from the sidelines, knowing that they may be caught up in the debacle but will not themselves be in the midst of the wreckage, the British and Americans raise supercilious eyebrows and say, “Sorry, but we told you so.”
The strongest shockwaves are rippling across France. Even though the downgrading had been well telegraphed, and S&P kindly obliged two months ago by accidently releasing a precursor of the French announcement, the loss of the AAA accolade marks a turning point in France’s decades-long effort to achieve sustainable parity in its monetary and financial relationship with Germany. That attempt has now ended in failure.
More: http://www.marketwatch.com/story/from-now-on-in-europe-everything-gets-worse-2012-01-16?link=MW_story_popular
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