Markets ignore downgrades but crisis persists

IT HAS been another very strange week for financial markets.

At the end of last week, the ratings agency Standard and Poor’s downgraded the government debt of a number of European countries, with the removal of the top ‘AAA’ rating from France the most noteworthy part of the overall downgrade.

Last week’s developments highlight just how much the situation in many European countries has deteriorated in recent years. Only four countries in the eurozone — Germany, Finland, the Netherlands and Luxembourg now have the top ‘AAA’ rating, which is quite incredible. The Finnish case is particularly interesting because the Finnish banking system went through its own collapse not too long ago, so perhaps there is hope for Ireland.