Mediterranean Homesick Blues (apologies to Bob Dylan)
Spain and Italy are both in the spotlight today, but for different reasons.
Standard & Poor’s has downgraded Spain’s long-term credit rating by one notch (from AA to AA-) after reports of weak growth combined with high levels of private-sector debt. The country’s high level of unemployment could also represent a significant drag on the economy, according to the ratings agency.
In Italy, lovable villain (and the country’s Prime Minister) Silvio Berlusconi is facing a key confidence vote over his handling of the economy, but also (and more interestingly) his personal scandals. It is likely that he will win the vote, but the margin will probably be slim. Opposition leader Pierluigi Bersani, who called the vote, said, “The government is not coping with the situation. The problems have all been laid out, but he only knows how to stay nailed to his seat using tricks.” Brilliant.
All of this of course comes on the day of yet another gathering of global leaders, struggling to stabilise the the economic system. Expectations are low. However, this weekend, the BRIC economies will warn the EU that indecision over its sovereign debt crisis is exporting currency volatility and potentially leading to a global recession. Fingers crossed.