EU Under Pressure as Standard & Poor's Slashes Greek Debt to Junk Status and Downgrades Portugal

The incredible, unfolding disaster in Europe continues to get worse, as Standard & Poor's announced they've cut the credit rating of Greece to junk status while downgrading Portugal two places from A+ to A-.

Greece's long-term credit rating was slashed from BB+ to BBB+. S&P also said the ratings for both countries going forward is negative as well.

Although fears are emerging about Greece being able to use its debt as collateral, for now that's still available to Greece, as at this time only the S&P has cut the debt of Greece to less than investment grade, and as long as one agency keeps an investment-grade rating of BBB- or better, using their debt as collateral is still an option.

I'm not sure if that would make be feel any better if I was the European Central Bank, but that's the case in theory.

Even though Germany has attempted to make it look like they're backing a bailout of Greece, every time they publicly state they are, they follow up with the need for Greece to do a lot more to cut their deficit than they are doing in order for Germany to back the plan.

Who can blame Germany, and why should they have to bear the brunt of the bailout when a socialist country like Greece offers their people what they can't afford to? Why should the German people have to re-distribute their money in a socialist manner to prop up what amounts to entitlements.

Already the Greek people have protested and whined because they have to get their financial house in order by having wages and benefits cut back that aren't based on the free market but just handed out to them by the Greek government. No wonder they're in the predicament they're in, and no wonder Germany rightly opposes bailing them out.

Germany understands that it doesn't matter about all the numbers being thrown about and what the consequences to the European Union will be, what they know is if Greece and other countries don't cut back on their re-distribution and socialist leanings, it won't matter if they get bailed out or not, they'll just have to be rescued again and again. I hope Germany holds strong on this and doesn't cave into pressure.

Greece should just be allowed to default in order to learn they can't take money from the productive and pass it out to the unproductive. Other countries would follow suit and you would see a nice resurgence of at least a more free market than exists in the dying Europe.

For Portugal, they've emerged as the next country in line to go through a credit crisis, and evidently they're deeply into it already, the reason the S&P downgraded them so strongly by to spots.

The deficit in Portugal soared from 2.7 percent in 2008 to 9.4 percent in 2009, causing analysts to note the strong risks the country now faces.

Analysts say this underscores the fact that the sovereign debt crisis is far beyond Greece. This is something that has been talked about by a number of economists and analysts for some time, including Italy, Spain and Ireland with Greece and Portugal. So it isn't a surprise that it's now coming to light, just that it took so long to acknowledge.

Part of the reason is many nations refuse to acknowledge they are a large part of the problem in relationship to the recession, as their policies and central banks printing almost endless amounts of paper money helped bring everything to the brink.

While the banks aren't blameless by any stretch of the imagination, the governments could be far more culpable than most people know or understand. It can no longer be hidden though, and we're seeing just the first glimpse of the depth of the excesses these socialist governments have been practicing, and there's a lot more to come.

Some are trying to differentiate between Greece and Portugal, implying their circumstances are different. But I don't see that as being the case. Portugal's problems are identical. They have increased their debt and spending while having low productivity in the country. What's different about Greece in that?

What they're trying to say is Portugal isn't in as dire straits as Greece is. And while that's true, they aren't that much better, and are now considered the second-worst behind Greece in the EU.

With debt levels expected to continue to rise in Portugal, projected to increase from 66 percent in 2008 to 95 percent in 2013, the country is vulnerable to default if they don't implement what is needed and debt levels rise even higher than estimated.

In other words, it's a complete mess in Europe, and it's hard to see how they are going to escape this without a lot of pain, if the EU survives at all when the smoke clears.

It seems these countries have taken advantage of being in the EU and irresponsibly tapped into the wealth their via the banking system in order to prop up their socialist ideals which obviously can't be supported. Now it remains to be seen if they can be truly bailed out, as Germany, and probably a growing number of other countries, will finally realize they can't allow these governments to access capital for the purpose of redistributing it without and real productive business activities being to back it up.