Eurozone finance ministers delayed their decision regarding how to finance Greece’s deficit.
Additional funding is required due to the extension the country received by the European government in order to implement the austerity program goals.
However, due to the optimism expressed by Eurozone finance ministers that a solution to the Greek problem will be found, we witnessed a relatively sharp decline in Greece’s risk premium last week.
Further evidence to the deterioration of European economy was received this week by France’s credit rating cut:
Moody’s reduced the rating from AAA to Aa1 with a negative outlook, emphasizing that there is uncertainty regarding fiscal developments in France as a result of the deterioration of economic data in the short term and the structural problems in the long-term.
Despite the downgrade, it seems like there are no concerns from a sharp increase in France’s financing costs, which would make it more difficult to refinance the country’s debt.
We note that France’s financing costs fell sharply even after S&P rating agency cut France’s rating in January to AA+.
Most economic data released last week did not provide a better picture of the European economy.
Eurozone Consumer confidence fell sharper than expected in November, to its lowest level since May 2009.
This is a negative indication about the future of retail sales in the Eurozone.
Initial estimate for Eurozone PMI (Purchasing Managers Index) has increased slightly in November (45.8 vs. 45.7 in October).
However, it remained close to its lowest level since July 2009 and indicated Europe’s economic contraction continues.
A surprising increase in Germany’s IFO business climate for November gives us a more positive indication, however, it is important to note that this came after six consecutive months of declines, and the index level remained relatively low.