Photo: AP/Mark Lennihan
The ratings agencies are major forces for fiscal tightening, as governments desperately hope to maintain their investment grade ratings and so on.But now look at this from Moody’s downgrade of Italian banks.
The #1 reason for the downgrade?
Increasingly adverse operating conditions, with Italy’s economy back in recession and government austerity reducing near-term economic demand.
So on the one hand, Moody’s pushes Italy to cut spending. And then on the other hand Moody’s punishes the banks for said spending cuts.