S&P’s downgrade of Polish debt: sounds familiar

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January 31, 2016 by AK

For those willing to read beyond the first paragraph, S&P provided a detailed list of Poland’s fiscal risks in their downgrade note (linked by Puls Biznesu).

The nationalists’ fiscal preferences have already begun to show, according to Moody’s:

Moody’s has warned that Poland’s incoming bank tax threatens the profitability and credit ratings of the country’s lenders.

Fitch analysts are also warning against fiscal self-indulgence:

Fitch analyst Arnaud Louis told reporters that he expects Warsaw to keep the deficit below 3% of GDP in 2016 and 2017… However, evident relaxation of fiscal policy has shifted the “balance of risks to the negative side,” he added.

This said, Poland’s credit rating remains high for a second-world country: still two notches above the lowest S&P investment grade, BBB-. Before the downgrade, it was on par with Latvia, Lithuania, and Slovenia, although below Estonia, Czech Republic and Slovakia. Now, it is the same as Spain’s and above Italy’s – and way better than Hungary’s BB+, the highest of junk-bond ratings. Hungary lost its investment-grade rating in 2011, under the stewardship of Viktor Orban, reportedly a role model for Poland’s Law and Justice.

Poland’s current BBB+ rating equals Russia’s best-ever, in place in 2006-8, in better times. S&P downgraded Russian Eurobonds to junk last January after a decade of investment-grade ratings. At BB+, Russia finds itself down there with Hungary, Croatia, Bulgaria, Turkey and Brazil.

There was much talk about creating a national rating agency back in 2014-15 to spite those Russophobic Soros-backed capitalists but the funding must have gone the way of the oil price since. Evil Wall Street, devious Sorosians against nationally-minded Main Street capitalists: we’ve heard all that, nothing to see here, give us something new, Beata & Jaroslaw.


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