Fitch calls for greater support for Italy to prevent 'cataclysmic collapse' of the Euro
The European Central Bank should ramp up its buying of troubled Euro zone debt to support Italy and prevent a “cataclysmic” collapse of the Euro, David Riley the head of sovereign ratings for Fitch, said on Wednesday.
Speaking to investors as part of a European road-show, Riley said the collapse of the Euro would be disastrous for the global economy, and while it is not Fitch's baseline scenario, it could happen if Italy did not find a way of its debt problems.
“The end of the Euro would be cataclysmic. The Euro is a reserve currency,” Riley said. “What would that do in terms of financial and political stability?”
“It is hard to believe the Euro will survive if Italy does not make it through” he said, adding that while many saw Italy as too politically and economically important to be allowed to fail, “one might also argue that it is too big to rescue”.
He also urged the European Central Bank to abandon its current reluctance to scaling up its purchases of troubled Euro zone debt such as Italy's and drop its resistance to the bloc's bailout fund, the EFSF, borrowing directly from it.
“Can the Euro be saved without more active engagement from the ECB? Quite frankly we think no,” Riley said, adding that the bank had plenty of scope to expand its balance sheet with unleashing a wave of inflation across the euro zone.
“Why not have the ECB come out and say 'We are going to cap interest rates', say 'We are not going to allow interest rates to exceed 7%' or whatever level they see is the limit?.. Why not turn the EFSF into a bank so it can borrow from the ECB so it doesn't have to go to the market?”
Fitch has warned that the economic outlook for the Euro zone has darkened further in recent months, but it has said it does not expect to strip France of its triple-A rating for this year at least. By contrast, Standard & Poor's has singled out France for a possible two-notch cut from its top rating.
Still, Riley warned that the euro zone's second-biggest economy was in a precarious position as the crisis rumbled on.
“France is the weakest AAA country in the euro zone,” he said, adding it had the additional burden of being the main country alongside Germany underpinning the euro zone's bailout fund.
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oh dear,,,,tough luck,
Fitch Ratings' long-term credit ratings are assigned on an alphabetic scale from 'AAA' to 'D', first introduced in 1924. (Moody's also uses a similar scale, but names the categories differently.) Like S&P, Fitch also uses intermediate +/- modifiers for each category between AA and CCC (e.g., AA+, AA, AA-, A+, A, A-, BBB+, BBB, BBB-, etc.).
Investment grade
• AAA : the best quality companies, reliable and stable
• AA : quality companies, a bit higher risk than AAA
• A : economic situation can affect finance
• BBB : medium class companies, which are satisfactory at the moment
Non-investment grade
• BB : more prone to changes in the economy
• B : financial situation varies noticeably
• CCC : currently vulnerable and dependent on favorable economic conditions to meet its commitments
• CC : highly vulnerable, very speculative bonds
• C : highly vulnerable, perhaps in bankruptcy or in arrears but still continuing to pay out on obligations
• D : has defaulted on obligations and Fitch believes that it will generally default on most or all obligations
• NR : not publicly rated
[basically ]
.en.wikipedia.org/wiki/Fitch_Group
Nothing more than pricing fixing! The ECB was fashioned to mimic the US Federal Reserve Bank. Just another private bank, masquerading as a government entity. The absolute best thing that could happen to Europe is for the Euro to simply disappear and all those nations return to their own “sovereign” currencies. All the Euro does is reduce all nations to the lowest common denominator... Only the bankers win, because they can just print more money.
Not to fear, my ire isn't reserved only for the Euro. Although the US has allowed the Federal Reserve Bank to impose its will on the rest of the world, the Dollar hasn't really been anything like a “reserve” currency, since 2008. Smart countries should have already dumped it and started to build their gold reserves. It's only a matter of time (short time by my estimate), before the Dollar is reduced to less than the value of toilette paper.
Better for Latin America to hotly pursue its own trading block and wean itself off the Dollar and Euro.
Tip, the Chinese Yuan will appreciate. Buy now & sell when it doubles in value.
l”ve got some.
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