I was on my way to the pub when Fitch saw fit to downgrade Italy last night. I wondered whether I should talk to a few people about it, but since all Fitch are doing, is playing catch-up with cuts already made by S&P and Moody's, I didn't bother.
Markets did react, though the rating cut was more catalyst than cause. But it is a reminder of the continuing influence of organisations which were discredited in the first part of the credit crisis.
It isn't the decision to downgrade Italy (or any other European country) that bothers me. I would have thought that one of the definitional features of a 'sovereign borrower' should be it's ability to print it's own money to repay it's debt. And that is something the Euro Zone countries have given away, making every single one of them less creditworthy than the UK. Yes, even mighty Germany.
What annoys me, is that with three rating agencies each adjusting ratings and 'outlooks' as well as putting countries on credit watch, we have a steady stream of bad news for any country whose credit is under pressure, which exacerbates the market reaction. It's nonsense, made even more nonsensical by the way that bank regulation forces everyone to pay undue attention to the ratings.
Anyway, the rating focus shifts to Hungary next week, as the 'raters' come calling. Personally, if they came to my door, I'd send them packing.
