Confidence had been at its lowest point but had slightly recovered in recent days on the strength that Greece was going to reach agreement with its private investors. In one fell swoop credit agency Standard and Poor's put paid to any confidence boost. Italy has been downgraded to a BBB+ and perhaps more surprisingly France has also been downgraded.
In what has become true French style Nicolas Sarkozy claimed that the UK should be downgraded before France. This was not simply a tit for tat approach but the fact that France believes the UKs financial position is no less vulnerable than their own. It does however add weight to what many British people believe about the EU. This is that it is not a unified force but rather made up of countries busily self serving and stabbing each other in the back.
Germany held on to its triple A rating but it did not help the German stock market. Shares dived on the news of possible credit downgrades and the slide has continued. It have been reported that some other countries have escaped the S&P EU axe. The details of the countries involved are still being released. These include Scandinavian countries.
The EU had looked a little more hopeful of late. However to add to Europe' woes today Greece has failed to reach agreement with creditors. The taalks collapsed late this afternoon and this is set to cause problems much further afield than just in Europe. It will damage the US economy also. The official statement by the private investors was, "Under the circumstances, discussions with Greece and the official sector are paused for reflection on the benefits of a voluntary approach. We very much hope, however, that Greece, with the support of the Euro Area, will be in a position to re-engage constructively with the private sector with a view to finalizing a mutually acceptable agreement".
For Europe and the global economy Friday January 13, 2012, has truly been an unlucky day.
In spite of the French downgrade Nicolas Sarkozy has said France will not implement any further budget cuts. He is a few months away from fighting a French election and will not want to alienate to antagonise possible voters.
The UK may have escaped today but it is not out of the woods yet. Currently it appears that the swingeing cuts implemented in the UK have appeased credit rating agencies such as S&P and Morgan and Fitch. The people however may hold a different opinion. There will be a limit in all countries as to what people stand for. Soon there will be the time when it is generally accepted that enough is enough.
Maybe the EU should give up now?