S&P Takes Action On 16 Eurozone Sovereign Governments

S&P acted on the sovereign debt of 16 eurozone nations. Nine were downgraded and seven kept at current status.

The action is likely to have long-term and troubling effects as the region tries to calm markets from the fear that the weak finances of some area governments could throw them into default. Alternatively, the bailout facility necessary to handle the sovereign paper problems of Spain and Italy would be well into the hundreds of billions of dollars. It is open to question whether those sums can be raised in the international capital markets. Bank balance sheets in parts of the region are weak, and may hold sovereign paper in the economically worst off nations. The entire system is a bridge about to collapse under its own weight

S&P announced that

We have lowered the long-term ratings on Cyprus, Italy, Portugal, and Spain by two notches; lowered the long-term ratings on Austria, France, Malta, Slovakia, and Slovenia, by one notch; and affirmed the long-term ratings on Belgium, Estonia, Finland, Germany, Ireland, Luxembourg, and the Netherlands. All ratings have been removed from CreditWatch, where they were placed with negative implications on Dec. 5, 2011 (except for Cyprus, which was first placed on CreditWatch on Aug. 12, 2011).
The outlooks on the long-term ratings on Austria, Belgium, Cyprus, Estonia, Finland, France, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovenia, and Spain are negative, indicating that we believe that there is at least a one-in-three chance that the rating will be lowered in 2012 or 2013. The outlook horizon for issuers with investment-grade ratings is up to two years, and for issuers with speculative-grade ratings up to one year. The outlooks on the long-term ratings on Germany and Slovakia are stable.

The list