Fears of a new Greek sovereign rating downgrade cause the Euro to slide

On the forex markets, the Euro yesterday dropped to an annual low against the yen, while also losing ground against the dollar, after rating firms "Moody"s Investors Service" and "Standard & Poor"s" announced further rating cuts for Greece were possible.

The Euro dropped yesterday to 110.90 yen at 8.33 AM, on the New York market, for the first time since February 24th, 2009. The Euro weakened against the dollar, dropping to 1.3478 from 1.3538. On February 19th, the Euro dropped to its lowest point since May 18th 2009, to 1.3444. This month the European currency lost 2.8% against the dollar.

"Standard & Poor"s" yesterday announced that it will leave the rating of Greece for long term loans at "BBB+", and at "A-2" for short term loans, with a negative outlook, but said the country"s rating could be cut further next month.

On December 9th, 2009, the agency began monitoring the rating of Greece for long term loans. Later, on December 16th, the agency kept Greece"s rating unchanged, but maintained its monitoring. At the same time, the rating for short term loans was also put on watch, with a negative outlook.

"In our opinion, a two-level downgrade may happen in the coming month", Standard & Poor"s analysts said.

In turn, Moody"s said that they would continue to watch the situation of Greece, especially whether the government in Athens would honor its commitment to cut the budget deficit. Currently Moody"s rating for Greece stands at "A2", with a negative outlook.

On the other hand, "Fitch Ratings" yesterday announced that it would keep its "BBB+" rating for Greece over the course of the coming months, with a negative outlook.

• The growth of the European economy remains fragile

The growth of the European economy will remain shaky and uncertain this year, according to the European Commission, which announced yesterday that it stands by its estimates that the Eurozone and the EU 27 zone would grow by 0.7 in 2010. The European Commission said that the GDP of the region returned to growth in Q3 2009, ending the most severe recession in the history of the EU. The recovery was possible due to the monetary policy of the European Central Bank and the liquidity it injected in the market, and due to the stimulus packages launched by the governments in the region.

• The default of one of its countries could break the monetary union

The default of a country in the Eurozone could mean the end of the monetary union, but this is unlikely to happen, Carl Heinz Daube, the head of Germany"s debt agency. "I thinks that if one of the 16 countries in the Euro zone goes into default, than the whole system would collapse", Daube said, adding: "If a country goes bankrupt, we will see the end of the Eurozone".