The dreaded “R” word..
Many in the market have long-felt that that Europe has just been trying to kick the can down the road long enough for EU banks to get their house in order to the extent that they could withstand a Greek debt restructuring (in which bond holders would get some fraction of the face-value on their bonds).
S&P seems to think the same, and 2013 may be the date when it all comes down: S&P says that a restructuring may be a pre-condition to accessing ESM funds which will supersede the EFSF in mid-2013…
Portugal will access the EFSF and the ESM there after, S&P believes… Most would agree…
EUR/USD continues to ply a 1.4050/1.4075 range despite the downgrades as the market has long forsaken PIG…it is S that is the key in the big picture. Spain needs to be the line in the sand for the EU…Their pockets are not deep enough should Spain fall…
Expect Greek and Portuguese banks to be downgraded later this week if the usual pattern holds…