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October 23, 2011

Merrill Lynch forecasts Congressional Super Committee failure and credit downgrade for the US and Greece Default Developments

1. The United States will likely suffer the loss of its triple-A credit rating from another major rating agency by the end of this year due to concerns over the deficit, Bank of America Merrill Lynch forecasts.

"The credit rating agencies have strongly suggested that further rating cuts are likely if Congress does not come up with a credible long-run plan" to cut the deficit, Merrill's North American economist, Ethan Harris, wrote in the report.

"Hence, we expect at least one credit downgrade in late November or early December when the super committee crashes," he added.

The bipartisan congressional committee formed to address the deficit -- known as the "super committee" -- needs to break an impasse between Republicans and Democrats in order to reach a deal to reduce the U.S. deficit by at least $1.2 trillion by November 23.

If a majority of the 12-member committee fails to agree on a plan, $1.2 trillion in automatic spending cuts will be triggered, beginning in 2013.




2. Telegraph UK - Europe's leaders are threatening to trigger a formal default on Greek debt and risk a “credit event” if banks refuse to accept losses of up to €140bn (£120bn) on their holdings.

Hardline eurozone members, backed by the International Monetary Fund (IMF), delivered the ultimatum this weekend after an official report found that in a worst-case scenario Greece could need a second bail-out of €450bn – twice the current package and more than the entire €440bn in the eurozone’s rescue fund.

If the banks called the EU-ECB-IMF troika’s bluff, they would potentially face nationalisation. A “credit event” would risk triggering credit default swaps – the scale of losses from which cannot be accurately quantified


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