THE WEEK THAT WAS... (December 02, 2013)

The club of countries honoured by the three rating agencies with a triple A status becomes more and more exclusive. Countries with a once uncontested status of top-debtor (the US, France and Austria for example) have not been members for a long time. Last week it was The Netherlands that fell from heaven after a downgrading by Standard&Poor’s. The downgrade of The Netherlands underlined what may be Eurozone’s biggest problem: even the strongest countries are suffering from weak growth and years of austerity, not only the ones in southern Europe.

Only three Eurozone countries*) still have the strongly desired AAA status: Germany, Finland and Luxemburg. One of them, Finland, at the moment has a more or less undisputed position although the total debt of the Finnish households is a serious concern; but the position of Germany has been weakened by the rescue attempts for Greece, Portugal and the Spanish banks; and Luxemburg seems too dependent on the financial sector.

Unemployment in the 17 Eurozone countries fell in October from 12.2 to 12.1 percent. Good news for the 61.000 fewer people who are jobless, however unemployment in the Eurozone remains near a record high of 19.3 million! Much of the dip in unemployment came from France, but it remains astronomical in Spain, 26.7 percent.  In Greece the rate was 27.3 percent in August, the Greek government is several months behind with reporting. At the same time inflation in the Eurozone raised to 0.9 percent.  That is below the European Central Banks’s 2 percent target and short of the level required to convince economists and the financial world that the Eurozone is safe from a deflation that could revive doubts about the survival of the Eurozone.

*) Inside Europe but outside the Eurozone there are four AAA-countries with quite strong positions: Switzerland, Norway, Denmark and Sweden. Nobody is surprised by Norway, an oil-rich country; Switzerland has a strong economy and a strong currency; Sweden and Denmark have the advantage of a low public debt. Canada, Australia and Singapore complete the list of ten AAA countries globally.