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Alternative Market Briefing

Negative rating for Germany, the Netherlands and Luxembourg puts increased pressure on Euro and financial markets

Tuesday, July 24, 2012

Beverly Chandler, Opalesque London: Bloomberg reports today that hedge fund manager John Paulson of Paulson & Co has told his clients that he believes there is a 50% chance that the Euro will break up, supporting his view that the currency is 'structurally flawed’.

Paulson’s views come on a day when the credit ratings agency Moody’s announced it had lowered its outlook for triple A-rated Germany, the Netherlands and Luxembourg to negative from stable. Moody’s action has left Finland as the sole country among the Euro sovereign area with a Aaa rating and 'stable outlook’.

Moody has taken this decision because of "the rising uncertainty regarding the outcome of the euro area debt crisis given the current policy framework, and the increased susceptibility to event risk stemming from the increased likelihood of Greece's exit from the euro area, including the broader impact that such an event would have on euro area members, particularly Spain and Italy".

The firm believes that even if Greece doesn’t leave the Euro, the cost of supporting it – and the other European poor cousins - from other Euro areas may be punitive. "Given the greater ability to absorb the costs associated with this sup......................

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