Innovation/Global Risk 

 Friday the 13th: S&P, Euro & a True Horror Movie 

By Shlomo Maital   



On Friday Jan. 13, the latest sequel in Europe’s ongoing horror movie played out.  The bond-rating agency Standard & Poor did the following:

  … S&P lowered the top ratings of France and Austria one level to AA+, with “negative” outlooks, while affirming the ratings of countries including Germany, Belgium and the Netherlands. The company also downgraded Italy, Portugal, Spain and Cyprus by two steps and cut Malta, Slovakia and Slovenia by one level.  The EFSF, the euro-region’s bailout fund needed to tap markets to finance aid for Greece, Ireland and Portugal, may lose its top rating if any of the bailout fund’s guarantors face a downgrade, S&P said.

    Friday the 13th is a 1980 American horror film directed by Sean S. Cunningham and written by Victor Miller. The film is about a group of teenagers who are murdered one-by-one while attempting to re-open an abandoned campsite.  European leaders are doing a brilliant rewrite. Drop by drop, one by one, their waffling, indecision, egoism and selfishness are driving the value of the euro down (to a new 11 year low re the yen) and making a disorderly Greek default  even more likely. 

    You thought there was agreement on a 2nd Greek bailout?  What was agreed, we now learn, was a 50 per cent ‘haircut’ (reduction in the face value of Greek bonds) by the banks. What was NOT agreed was the interest to be paid in the interim, nor the maturity (when the 50 per cent would be paid).  There is now deadlock on these key issues.  Great work, Europe!  You had us fooled. We actually thought you had hammered out a deal.  Well, dumb us! 

     S&P has been hammered by the French PM Francois Fillon, claiming its decision is “political”.  Wrong, Fillon!  S&P has at last told the truth! In its statement, S&P questioned whether Europe can “austerity” itself out of the crisis, noting that only economic growth will generate the tax revenues needed to pay outstanding debts. And there is no European growth policy in place at present, only austerity. 

   I think that in the wake of Friday the 13th (Europe’s version of the horror movie), disorderly Greek default has become virtually certain, and the world knows it. Europe continues to drag the global economy down with it, as one by one debt-ridden European countries fall, like the teens in the 1980 movie. 

   Perhaps some of us can bring European leaders to the International Court of Justice, on the grounds of committing crimes against humanity?