Mar. 16, 2010 (United Press International) -- Economic growth covers lots of ills but Europe and the United States cannot rely on growth to cover for them this time, credit rating agency Moody's said.
Credit rating agencies have thrown cold water on parties before. Like the doctor who tells you the rash you cannot see is still there, Moody's said Monday the top AAA ratings enjoyed by the United States, Germany, France and the Nordic countries are in jeopardy due to rising debt.
Granted, France and Germany are in better shape, having entered the recent recession with less debt than others. However, the somber warning Monday said the necessary spending cuts and tax hikes needed to maintain the all-important Triple A ratings in other countries put "social cohesion" at risk.
These are countries where you don't expect riots for economic reasons. Further, these are countries that have led and shaped the global economy for decades. Should their ratings drop, their borrowing becomes more expensive, making it that much harder to claw back to the top of the rating's structure.
Moody's said Monday "growth alone will not resolve an increasingly complicated debt equation. Preserving debt affordability at levels consistent with AAA ratings will invariably require fiscal adjustments of a magnitude that, in some cases, will test social cohesion."
In Europe, finance ministers agreed on a bailout package to help Greece dig out of its debt problem but details remained sparse, the EUobserver said.
One theme on the Greek rescue package that has remained consistent for the past month was evident Monday: the theme of reluctance.
Even sharing the same currency, the euro, has not made it comfortable for politicians in relatively austere Germany to tell voters it is necessary to bail out Greece, where pension plans are comparatively luxurious.
Luxembourg Prime Minister Jean-Claude Juncker said Monday, "what will happen if necessary, and we're still convinced it won't be necessary, is that we'll reach an agreement in the eurozone to offer bilateral support in a coordinated form."
The plan finance ministers agreed to support now goes to the European Council for approval.
On Wall Street, the response to a 1,336 page financial reform proposal presented by Senate Banking Committee Chairman Christopher Dodd, D-Conn., might be measured by an investor reaction among financial stock and Bank of America (NYSE:BAC) shares flat-lined on Monday -- not a tweak of movement at all.
Citigroup shares, however, fell 2.02 percent and American Express (NYSE:AXP) shares fell 0.15 percent while JPMorgan Chase (NYSE:JPM) shares dropped 0.19 percent.
The Dow Jones industrial average notched its fifth consecutive day of gains Monday, defined by modesty. Gains have averaged 0.17 percent during the streak -- slow and steady, which is a standard pattern while investors wait for the U.S. Federal Reserve to announce an interest rate decision. This week, the central bank is widely expected to keep bank-to-bank interest rates at historic lows of 0 percent to 0.25 percent.
In international markets Tuesday, the Nikkei 225 in Japan fell 0.28 percent, while the Shanghai composite index rose 0.53 percent. The Hang Seng index in Hong Kong dropped 0.27 percent, while the S&P/ASX in Australia added 0.28 percent.
In midday trading in Europe, the FTSE 100 in Britain rose 0.48 percent, while the DAX 30 in German added 0.76 percent. The CAC 40 in France gained 0.85 percent, while the pan-European DJ Stoxx 50 lifted 0.71 percent.
