S&P downgrades France and Austria from AAA rating
Traders work on the floor of the New York Stock Exchange on January 13, 2012 in New York City. After the markets closed, Standard & Poor's announced another downgrade of a number of European countries.
Jeremy Hobson: U.S. markets are closed today for the holiday -- and that's probably a good thing, because right after Wall Street closed on Friday, the ratings agency Standard and Poor's dropped another bombshell. The firm downgraded the credit ratings of nine European countries. France and Austria lost their prized AAA credit ratings.
Marketplace's Stephen Beard is live with us from London for the latest. Good morning Stephen.
Stephen Beard: Good morning, Jeremy.
Hobson: This is being seen as a bigger deal, I guess, than your run-of-the-mill downgrade in part because France lost its AAA rating. And I have to ask why that's such a big deal, because it happened here in the U.S. and didn't seem to cause much of a problem?
Beard: The U.S. is different, Jeremy. Because of the dollar, it still is seen as a safe haven in turbulent times; enough people are still prepared to lend to the U.S. And that keeps U.S. borrowing costs down. You can't say the same about the euro -- some even question whether it'll survive. So those mass eurozone downgrades are certainly more damaging than the U.S. downgrade.
Hobson: And what about this other piece of euro news that we got on Friday that some people said was actually a bigger deal than the downgrades and that is a collapse of the debt talks in Greece.
Beard: Yeah, potentially, this is more serious. These are talks aimed at easing Greek debt burden by writing a lot of it off in an orderly fashion. The banks, and others that lent money to Greece are involved in these negotiations, but they were asked to take a bigger hit than they expected, and they stormed out on Friday.
Now Matina Stevas, of Dow Jones and the Wall Street Journal, says this doesn't mean the talks are over.
Matina Stevas: Obviously as any negotiations reaching its final stretch, the negotiating parties will bring in all the techniques and all the tactics, walking out and banging door behind you is quite a common tactic.
Those debt talks resume on Wednesday. But Matina says there's a big danger here Greece has got to borrow a lot of money on March 20. It's got a lot of talks to get through before then. It could run out of time; it could suffer an accidental default.
Hobson: Marketplace's Stephen Beard in London, Stephen thanks.
Beard: OK Jeremy.