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The New Egypt

Moody’s cuts Egypt’s credit rating

Scott Tong Jan 31, 2011
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STEVE CHIOTAKIS: It’s another day of protests in Egypt. The stock market’s closed. A lot of businesses are shut down as well. And the government, as you no doubt have heard, is holding onto power as much as they can. Moody’s today cut Egypt’s debt rating a notch, worried about how much the unrest is costing the government. That’s gonna make it even tougher for Egypt to borrow money. We’re gonna devote a few minutes to this evolving story right now.

First, Marketplace’s Scott Tong is with us live from Washington with how the situation is spooking the global economy. Scott, good morning.

SCOTT TONG: Good morning.

CHIOTAKIS: Where are the economic worries coming from?

TONG: Moody’s frets about what it calls “political event risk.” Nobody’s really sure who will be running this economy going forward. And it’s worried that the government may try to spend its way out into protesters’ hearts. I just spoke to Tim Ash over at the Royal Bank of Scotland.

TIME ASH: Governments very often have to make choices. They can meet day-to-day payments, for example salaries and wages. Or they can cover things like debt service payments. And obviously politics can change priorities.

And yesterday Steve, President MuBarak promised that he would keep subsidies flowing for food and gas, and this is real money. Four out of five Egyptians get a subsidy.

CHIOTAKIS: Alright, so what about, Scott, the broader risks? I mean, for example, the Dubai stock market fell 4 percent today. What’s going on there?

TONG: Stocks fell across the region: airlines with Egypt routes, shipping companies doing business in the Suez Canal. A lot of analysts consider the initial market freak out over done. The Suez Canal is still open, where about a million barrels of oil flow every day. And OPEC today said no one should be worried about oil supplies.

CHIOTAKIS: Alright. Marketplace’s Scott Tong in Washington for us. Scott thanks.

TONG: You’re welcome.

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