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The Political Factor behind the Downgrade of European Countries’ Credit Ratings

An article published on the People’s Daily’s website comments on Standard & Poor’s motivation for the recent downgrade of European countries’ credit ratings. The article suggested that the downgrade increased the complexity of resolving Europe’s debt crisis and that it is now more than a simple financial move. The article said, “Britain’s debt crisis is rarely discussed in media reports, but Britain is a country heavily dependent on finances. Its debt crisis is no less severe than in any other country. However, Britain is the closest ally of the United States. [Therefore,] it is almost impossible to downgrade Britain’s credit rating.

“Austria was downgraded unexpectedly, but looking at it from a political angle, Austria has been Germany’s most intimate friend. Therefore, America’s Standard & Poor’s downgrade of Austria’s credit rating can have the effect of giving Germany a warning.

“Downgrading France appears to be reasonable, but it is actually still politically motivated. It has very little effect on the French government’s borrowing costs, but it can have a dire consequence for Sarkozy’s reelection efforts.

“Standard & Poor’s downgrade of European countries’ credit ratings is actually to pave the way for America’s QE3. The voice from the U.S. Federal Reserve for starting QE3 has never stopped; it is, in fact, showing recent signs of heating up. There is not much time left for Obama (to start QE3 before the election in November). Therefore, he needs to hurry up to take action.”

Source: People’s Daily, January 19, 2012