Spain Suffers Another Downgrade; Greece Nearly Shutdown

Arthi Gupta
19 Oct, 2011
New York City

European indexes gained on optimism of a resolution to the sovereign debt crisis. Third credit rating agency lowered Spain''s credit rating and cited a lack of progress in debt resolution. Greek unions began a 48-hour strike to protest against further austerity measures.

[R]2:20 PM Frankfurt – European indexes gained on optimism of a resolution to the sovereign debt crisis. Third credit rating agency lowered Spain''s credit rating and cited a lack of progress in debt resolution. Greek unions began a 48-hour strike to protest against further austerity measures. Permira offered to acquire Genesys from Alcatel-Lucent for $1.5 billion.[/R]

Stocks in Europe gained and market indexes advanced on the hopes that regional leaders are close to finalizing the details of European rescue fund. Markets overlooked the third downgrade suffered by Spain.

The conflicting media reports suggested that European leaders are likely to increase the European Financial Stability Facility to as high as €2 trillion.

Financial Times Deutschland quoted German Finance Minister Wolfgang Schaeuble as saying on Tuesday that the lending capacity of the EFSF will be raised to a maximum of €1 trillion.

However, quoting EU diplomats, the Guardian reported that France and Germany have reached an agreement to boost the euro-zone''s rescue fund to €2 trillion from €440 billion.

The EU officials, however, have reportedly rejected the news, saying no deal has been reached.

Moody''s Lowers Spain’s Credit Rating

Spain''s credit rating was downgraded by two notches to A1 from AA2 on Tuesday by Moody''s Investors Service.

Moody''s said no resolution to the country''s debt crisis has emerged since it began reviewing Spain''s ratings in July, and prospects for improvement were hampered by worsening outlooks for growth, both globally and in Europe.

Moody''s becomes the third ratings service to downgrade Spain in less than a week, following Standard and Poor''s and Fitch Ratings last week.

Greek Strike Begins

Greek unions began a 48 hour strike on Wednesday affecting public services, businesses and government departments. The strike comes ahead of a vote on more austerity measures, including pension and public sector wage cuts on Wednesday evening.

The European Central Bank President Jean-Claude Trichet said in an interview to the Frankfurter Allgemeine Zeitung, a transcript of which was published at the central bank''s website on Tuesday that it should be possible in future to impose decisions on countries that persist in not complying with the Stability and Growth Pact, thereby putting at risk the stability of Monetary Union.

Separately, EU economic affairs commissioner Olli Rehn said Portugal may not meet its targets for reducing its budget deficit in 2011. The targets are part of conditions for receiving EU/IMF aid.

Separately, Portugal also passed steep austerity measures that several EU officials called “brave.”

In Paris, CAC-40 Index gained 30.49 or 0.9% to 3,171.30 and in Frankfurt DAX Index edged higher 72.00 or 1.2% to 5,949.04.

Permira Offers to Buy Genesys

Permira controlled fund made a binding offer to acquire Genesys, a global expert in contact center technology software, from Alcatel-Lucent in a transaction valued at $1.5 billion.

Carlyle Buys Stake in Telecable

The Carlyle Group, the U.S.-based private equity firm agreed to buy 85% stake in Spanish cable-television company Telecable de Asturias S.A.U. in a deal valuing the company at €400 million or $549.4 million.

The seller, Spanish regional savings bank Liberbank SA, will retain a minority stake in Telecable following the close of the transaction

Gainers & Losers

Accor SA surged 2.5% to €22.62 after the hotel chain group said third quarter group revenues increased 2.7% on a reported basis to €1.62 billion from last year. On a like-for-like basis, revenue for the quarter increased 5.8%.

Nordea Bank AB rose 1.1% to SEK 56.85 after the Swedish financial services group reported third quarter total operating income fell 12% to €2.09 billion, from €2.36 billion a year ago.

Net profit in the quarter slumped 43% to €406 million compared to €711 million last year. Earnings per share fell to 0.10 euros from prior year''s 0.18 euros.

Saab AB plunged 5.1% to SEK 125.80 after the Swedish aerospace and defense contractor said third quarter sales declined 3.2% to SEK 4.84 billion from SEK 5 billion in the prior-year quarter.

Net income in the quarter surged to SEK 1.1 billion SEK 10.15 per share versus SEK 188 million or SEK 1.64 per share in the same quarter last year.

TeliaSonera AB dipped 0.4% to SEK 49.84 after the Swedish telecommunications firm reported third quarter net sales dipped 1% to SEK 26.61 billion from SEK 26.87 billion kronor in the prior year.

Net income in the quarter decreased 19% to SEK 4.86 billion from SEK 5.99 billion kronor in the prior-year period. Earnings per share dropped to 1.12 kronor from 1.33 kronor. Prior-year results have been restated.