Mendoza School of Business

Europe can’t catch a break

Published: January 15, 2012 / Author: Ben Rooney

The following is an excerpt from a CNN article that quotes Finance Professor Jeff Bergstrand on how the eurozone downgrades will impact interest rates. To read the entire article visit: Europe can’t catch a break

The downgrades of nine eurozone governments by Standard & Poor’s wasn’t a surprise, but they came just as there were tentative signs of improvement in the region’s debt crisis.

Last week’s auctions of Italian and Spanish debt drew strong demand, modestly easing borrowing costs. And recent moves by the European Central Bank have alleviated concerns about a credit crisis in the banking system.

S&P said the downgrades were driven by “insufficient” policies by European leaders that have failed to fully address the root causes of the crisis.

The agency also pointed to risks associated with a deeper-than-expected recession, tightening credit conditions, rising borrowing costs for a growing number of nations and the simultaneous push to get out of debt by both households and governments.


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