The Telegraph UK (Link) - Ambrose Evans-Pritchard (December 21, 2010)
Citigroup has warned of a fresh wave of bank failures and sovereign defaults in Europe unless EU leaders come up with a credible response to the crisis.
Prof Willem Buiter, the bank�s chief economist, said the eurozone was paralysed by a �game of chicken� between the European Central Bank and EMU governments.
Both sides are trying to shift responsibility on to the other for shoring up southern Europe and Ireland, raising the risk of contagion spreading. �The market is not going to wait until March for the EU authorities to get their act together. We could have several sovereign states and banks going under. They are being far too casual,� he said.
Mark Schofield, Citigroup�s global head of interest rate strategy, said Portugal would need an EU rescue soon and that it was �highly likely that Spain will go the same way.� This risks overpowering the �440bn (�373bn) bail-out fund.
�Restructuring of some sovereign debt is inevitable. There is a chance that Spain could still make it, but the debt trajectory looks unsustainable if a broader EU-wide solution isn�t found,� he said.
The warnings came after Moody�s said it might downgrade Portugal�s A1 rating by one or two notches on growth worries, but said the country�s solvency was �not in question.�
Meanwhile, Fitch Ratings has placed Greece�s �BBB-� long-term foreign and local currency Issuer Default Ratings on Rating Watch Negative.
The move is pending the outcome of a rating review by Fitch, expected to be completed in January, �which will focus on an assessment of Greece�s fiscal sustainability in the wake of the measures that the authorities have taken this year under the IMF-EU program.� as well as the outlook for the economy and the �political will and capacity� of Greece to carry out the reforms, Fitch said in a statement. �
Economic Crisis ~ Europe