Yesterday Moody's lowered Greece's rating to Ca, a level that borders on default. This casts a negative light on eight of the country's banks. Something that gets back to the image of ratings agencies that few or none are getting carried away by what looks like a solution for Europe.
The rating cut contributed to the short-sightedness of last week's confidence. The end of the respite was felt yesterday when the markets lashed out at the European Bank, by virtue of its exposure to Greek debt and declines in stock markets in general, but particularly the Italians.
The markets are proving that doubt persists about whether the peripheral debt crisis will spread and the United States government's flirtation with payment defaults.
Even though the summit of European leaders held on July 21 released some tension, the underlying problems still remain: however much the European leaders draft attempts to sketch an individualized scenario for the Greek situation, it fails to consider that another country will follow in Greece's footsteps and how the EU would react if that happens.
So, the differences in Greece, Ireland and Portugal are being raised, the Spanish risk premium is rising, our bonds are shooting up past the critical 6% mark, and Italian risk measurements are increasing.
The lack of trust in Europe's strategy to address an upcoming recovery episode remains clear, because the Eurogroup has still not found an antidote to keep the crisis from spreading.
Advances made during the summit demonstrated a unity of previously divergent discourse within the heart of the EU. A conclusion reached out of mere pragmatism. But the markets will continue to toy with the peripheral dominoes.
