Rating agencies, the pilot fish of the financial sharks, have struck again. After hitting Italian banks earlier this week, Spain and Greece were added to the hit list today.
The latest attacks will add to the debt burdens already staggering the two nations, and may indicate a further push on Greece to abandon the eurozone.
The downgrades will also draw the heightened focus of those financial vultures we mentioned earlier today, the financial brigands who use their vast wealth first to destabilize nations, then stage lethal raids, grabbing up the public assets built up over the course of millennia, using financial rather than military WMDs.
Military assaults open with attacks, often by stealth aircraft, against the target’s defensive raider and anti-aircraft system, destroying the enemy’s ability to meet the ensuing assault against critical infrastructure. Downgrades have a similar effect, weakening the target’s ability to respond to ensuing assault on critical infrastructure.
Fitch’s strikes at Greek banks
And the apparent cause was an interview by radical Left coalition Syriza leader with CNN’s Christiane Amanpour, in which Alexis Tsirpas declared:
“We want to change the austerity measures in Greece, also in Europe. We want to do this with the incorporation of other forces and people of Europe, the people who want a big change. Because everybody now understands that with this policy we are going directly to the hell. And we want to change this way.”
The reaction, from The Guardian:
Fears that Greece might leave the eurozone, sparking global turmoil, intensified tonight as Fitch downgraded its credit rating. The ratings agency said that there was a heightened risk that next month’s election will lead to a government that does not support the current austerity plan, leading to a break-up of the single currency and a Greek default. Fitch would also put all eurozone countries on negative watch, which could lead to further downgrades.
In a statement, Fitch said
The downgrade of Greece’s sovereign ratings reflects the heightened risk that Greece may not be able to sustain its membership of Economic and Monetary Union (EMU).
The strong showing of ‘anti-austerity’ parties in the 6 May parliamentary elections and subsequent failure to form a government underscores the lack of public and political support for the EU-IMF EUR €173bn programme.
In the event that the new general elections scheduled for 17 June fail to produce a government with a mandate to continue with the EU-IMF programme of fiscal austerity and structural reform, an exit of Greece from EMU would be probable.
Fitch went on to warn that a Greek exit would likely result in widespread default on bonds issued by Greek companies, as well as its own sovereign debt.
Spain in the crosshairs
With a ravaged economy, massive unemployment, an already aroused Indignados movement, and a deeply conflicted history, Spain has become increasingly vulnerable to the raiders’ rapture.
With a Spanish bank run already underway, fears that Tsirpas’ call for transnational resistance to the austerians has to have certain peoples knickers teisted.
And so comes the inevitable download, raising the cost of doing financial business in an already depressed economy.
Looters are salivating.
From the BBC:
Ratings agency Moody’s has cut the credit ratings of 16 Spanish banks, a further blow to a country that is struggling to deal with the bad debts of its banking sector.
It also cut the debt rating on Santander UK, a subsidiary of the Spanish banking giant.
It comes after shares in struggling lender Bankia fell another 14%. They have almost halved in value this month.
Fears about losses at Spanish banks has hit shares across Europe.
The banks include Banco Santander and BBVA, the biggest banks in Spain. Ten of the 17 banks were also put on negative credit watch, meaning that further downgrades are possible.
More from The Guardian’s Giles Tremlett:
The moves from the credit rating agency came after a day of fears that Spain will be the next domino to fall if Greece leaves the euro, as the country was forced to deny that there was a run on its fourth-biggest lender, Bankia.
Bankia shares fell almost 30% at one point after reports – later refuted – that depositors were withdrawing their funds. It was bailed out only last week when the government converted loans into a 45% stake.
The European commission warned last week that high debts in the regions, which account for half of public spending, could prevent Spain meeting its deficit goal of 5.3% of GDP this year.
“It is not true that at this time a flight of deposits from Bankia is taking place,” said Fernando Jiménez Latorre, the deputy economy minister. El Mundo newspaper reported that clients had withdrawn €1bn (£800m) of deposits from the bank since last week’s bailout.
But hey, we’re recovering, right?