Egan Jones Downgrades Italy

The Downgrades are coming in fast and furious and Egan Jones has seemingly been ahead of the curve compared to their peers (S&P, Fitch, Dagong and Moody's).

Italy has been downgraded from BB+ to BB citing, "the country’s debt is ”growing, while GDP is not.”, according to the Wall Street Journal


Italian BTP yields are trading around their earlier highs at 7.21% which is a level that is clearly not sustainable as far as debt maintenance goes and this is the level at which Greece, Ireland and Portugal all sought bailouts.


With the IMF rumor being denied from last night, it is estimated that Spain and Italy will need between $500 and $800 billion Euros to operate within the next 18-24 months. As Barclay's pointed out early today, the IMF is unlikely to have the resources. As I pointed out last night, the IMF in 2010 voted to double member/donor nation quotas from $375 billion to $750 billion, the problem being only 17 of the 187 donor nations have passed the new quotas through parliament or in the US, Congress (Congress has not taken up the issue and given the fact we are the biggest donor by far, it is not likely that Congress will pass the issue with the Super Committee failing to reach an agreement last week and automatic, across the board spending cuts coming and all of this as we approach an election year-I don't think it would be a politically smart vote given the trouble here at home). 


I can't remember a time in which ratings downgrades came in so fast and furious, it seems the ratings agencies are trying to re-establish their credibility given their lack of foresight during the housing bubble.