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S&P issues warning to euro zone

Tuesday, December 06, 2011 - 01:58

Dec 5 - Summary of business headlines: S&P warns 15 Euro countries face possible credit downgrade; Nobel economics prize winner says Europe is under a severe threat; Nasdaq back in the green for 2011. Conway G. Gittens reports.

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Standard and Poor's placed a negative credit watch on 15 members of the euro zone, citing systemic stresses in recent weeks, that of course due to the spreading two-year debt crisis. S&P says tightening credit conditions, higher risk premiums on sovereign debt and political wrangling within the euro zone are the other reasons. Negative credit watch means the countries could see a lower debt rating within 90 days of the warning. This comes on the same day Christopher Sims, the latest winner of the Nobel Prize in economics, provided a grave assessment for the euro. SOUNDBITE: CHRISTOPHER SIMS, WINNER OF NOBEL PRIZE IN ECONOMICS (ENGLISH) SAYING: "Unless the system can be modified so that there is a lender of last resort, so that there is at least one form of government debt, a Euro bond, that is not subject to default risk - because it is a bond that promises to pay Euros and Euros are always available - unless a solution like that can be arranged I think that countries are going to realize that there is not much really that they are getting out of the Euro and might decide to depart." That's sure to be an idea euro zone leaders consider at a key meeting later this week. On Wall Street: The Nasdaq once again turned positive for the year, but stocks lost some of their altitude on that expected warning from S&P. European markets were already closed when the S&P news began to trickle out. But there was caution as German Chancellor Angela Merkel and French President Nicolas Sarkozy laid out a joint plan to change the EU treaty in attempt to halt the debt crisis. Shares were up for the day, but gains were modest. Conway Gittens, Reuters

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S&P issues warning to euro zone

Tuesday, December 06, 2011 - 01:58