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Morgan Stanley Downgrades World to ‘Triple-C Crisis’

Tuesday, 11 Oct 2011 01:34 PM

Morgan Stanley economist Joachim Fels has demoted the global economy from triple-B to triple-C and says better policy decisions are needed, The Wall Street Journal reports.

“What we had called a BBB recovery — bumpy, below-par and brittle — morphed into a CCC crisis — one of confidence, competency and credibility — during the summer,” Fels wrote in a note to investors.

Though Fels believes policy worries are far too abundant, he also says stepped up measures from central banks, some decent economic data and indications that EU governments appear to be doing a better job of coordinating their actions are signs of hope.
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“Better policy decisions on both sides of the Atlantic are needed to get us out of this fix,” Fels says.

“In Washington, fiscal gridlock remains the name of the game, and a resolution, if any, will have to wait until at least December 21, the self-imposed deadline for Congress to vote on whatever fiscal compromise the super-committee will come up with by November 23.”

Fels says he remains convinced there needs to be an agreement by euro area governments “to take a big step towards fiscal integration, coupled with a mandate for the ECB to serve as a lender of last resort.”

“I’m confident that governments will take this route eventually, because the only alternative is euro break-up, which would be even less palatable,” Fels says. “But we are not there yet.”

Reuters reports that any further delays to the ratification of the expansion of the European Financial Stability Facility, which requires the approval of all 17 eurozone governments, could unhinge markets already under pressure from signs that the crisis is spilling beyond Greece's borders.

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Morgan Stanley economist Joachim Fels has demoted the global economy from triple-B to triple-C and says better policy decisions are needed, The Wall Street Journal reports. What we had called a BBB recovery bumpy, below-par and brittle morphed into a CCC crisis one...
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Tuesday, 11 Oct 2011 01:34 PM
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