After The Downgrade, Eyes Turn To Monday's Markets

Aug 7, 2011
Originally published on August 7, 2011 11:22 am
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JOHN YDSTIE, Host:

Hi, Tom.

TOM GJELTEN: Hi, John.

YDSTIE: Tom, Spain lost its AAA rating back in 2009. So is there some sympathy there in Madrid for what we're going through here this weekend?

GJELTEN: Well, John, sure. There is sympathy. People here know firsthand what a downgrading of a bond rating can actually mean for country, in terms of higher borrowing costs for the government, greater difficulty financing the government's debt, and a real drag on the economy. It just makes it all the harder to get out of a deep rut. So, of course, there's sympathy although, you know, it may be more in the sense of now you know what we've been dealing with, 'cause misery loves company.

YDSTIE: This could provoke a tsunami in the form of a Black Monday in the world markets.

YDSTIE: So that's really what people are expecting.

GJELTEN: We'll have this rolling wave of market openings. And as I'm sure you know, John, markets in the Middle East operate from Sunday through Thursday - so they've already open. And, in fact, we have seen big declines there, about five percent down in Saudi Arabia and Dubai. And markets really down sharply in Israel, as well. So there is real concern about a worldwide collapse in the markets tomorrow.

YDSTIE: People will remember that Europe, last week, was already handling a major debt crisis of its own, and the leaders there were debating what to do. How do you think this debt downgrade in the U.S. is going to complicate matters for the Europeans?

GJELTEN: And we now hear that there will be a conference call tomorrow morning among the finance ministers of these Group of Seven industrial countries, trying to sort of get on the same page before the markets open. So there is more urgency now to all these discussions in Europe about how to deal with the European debt crisis. But the problem here, John, is there is real disagreement among European leaders about what to do - some squabbling and really open disagreements.

YDSTIE: How much of a connection is there between the debt crisis in Europe and this debt crisis that we have in the USA?

GJELTEN: One other thing in common, John, between the United States and Europeans, as they experience this debt crisis, is there is a strong political component to this crisis. You know, S&P talked about the political paralysis in the United States, there's also political paralysis in Europe. So this is a on both sides of the Atlantic - as much of a political crisis as it is a financial crisis.

YDSTIE: NPR's Tom Gjelten speaking with us from Madrid, Spain. Tom, thanks a lot.

GJELTEN: Thank you John. Transcript provided by NPR, Copyright NPR.