According to Bloomberg, Italy’s credit rating was cut by Standard & Poor’s on concern that weakening economic growth and a “fragile” government mean the nation won’t be able to reduce the euro-region’s second-largest debt burden.
“The rating was lowered to A from A+, with a negative outlook. S&P said Italy’s net general government debt is the highest among A-rated sovereigns, and the company now expects it to peak later and at a higher level than it previously anticipated.”
The euro debt crisis just becomes worse and worse and many efforts in the past have seen go down to the drain.
In my opinion, probably the euro central bank has made the same mistake as most of the investors, Loss Aversion. The debt problem has lasted more than 2 years but no decisive action was taken.
It is just like an investor who bought a company share and has been watching the price dropping lower and lower. He was so afraid of cutting lost and just prayed every day that the price would come back. Sometimes, the investor would buy more shares hoping to average down the price but all the additional money just mounted the losses.
Surely cutting loss is painful, but first cut is always the best cut.