Tuesday, March 30, 2010

Are Spain and Italy next in line?

First they were called the PIIGS. Then, various banks and other institutions banned that acronym. So economists opted for Club Med. I have not read or heard any threats of suing the economists from the real Club Med, so that is the name that appears to be able to stick. I am, of course, referring to the southern euro area member states, as PIIGS stands for Portugal, Italy, Ireland (one exception per acronym is allowed), Greece and Spain.

Now, unless you have spent the last few months on another planet, Greece has been the focus of attention. A few days ago Portugal got a, rather unwelcome I might add, boost in that manner when rating agency Fitch Rating lowered its score from AA to AA- and attached a negative outlook for the future.

The currency market reacted to that and other negative news, for example the painfully clear message that Europe cannot even agree to disagree on how to help Greece overcome its troubles let alone to agree on any substantial involvement, by sending the Euro lower against the Dollar and other currencies.

This post is by Edin Mujagic, a monetary economist here at ECR.