If the global financial markets seemed uncharacteristically calm following the raft of European debt downgrades announced Friday, it's because a) the markets had long been expecting the downgrades and b) at the moment, the markets are actually more interested in the fragile state of Greece.
After the U.S. equity markets closed Friday, Standard & Poor's announced sovereign-credit downgrades for France, Austria, Malta, Slovenia, Slovakia, Italy, Spain, Cyprus and Portugal.
The Dow Jones Industrial Average, which opened Friday down more than 100 points, finished the day down less than 50, essentially shrugging off the midday chatter related to the sweeping downgrades.
“The markets were saying, ‘There's nothing new here,'” said Oliver Pursche, president of Gary Goldberg Financial Services, which has $550 million under management.
“It's always good news for the markets when there's no new news,” he added.
The fact that Greece, which is already rated as junk status, was not included in the latest ratings agency fire alarm is more along the lines of what the markets want for now.
“Right now, the market just wants Greece off the front page, and [the market] seems to be quite content with the idea of buying time,” said Quincy Krosby, market strategist at Prudential Financial Inc.
Greece is the central focus from both inside and outside the eurozone because it is viewed, for better or worse, as a live case study of the kind of austerity measures that virtually every country in the world has been avoiding.
While it is an interesting exercise to consider if, when and how the Greek government ultimately might default on its debt and effectively abandon the European Union, the immediate spectacle has the leaders of a country of less than 11 million people in a very tight spot.
In one direction, Germany and the European Central Bank are making every effort to coax Greece toward a slew of serious austerity measures that would mean smaller government budgets and higher taxes.
And in another direction, the nearly bankrupt Greek government is staring at an $18.4 billion debt payment that comes due in March. An analyst at Fitch Ratings Ltd. on Tuesday predicted that Greece will not be able to cover that check.
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The country's financial survival could hinge on the success of discussions this week between Greek officials and representatives from the European Union and the International Monetary Fund.
Greece is hoping the IMF, of which the United States is the largest shareholder, will see fit to sign a loan for more than $160 billion.
But the ultimate success of those talks is said to be contingent on how much progress Greece makes in trying to convince banks, pension funds and hedge funds that collectively hold more than $260 billion worth of Greek debt to take a haircut.
All of that weighty stuff poses a legitimate threat to the kind of status quo that Ms. Krosby and the markets in general seem to be enjoying at the moment.
“Investors are nervous because the math doesn't add up,” Ms. Krosby said. “The market is worried that the Greek officials will not be able to navigate the pressures against the austerity measures.”
It's no big secret that Greece can't pay its bills without a lot of help that involves forgiving some debt. And let's not forget the fact that any successful recovery for Greece also will require some powerful economic growth, of which there is little in sight.
“It's a chronic situation, and that's the problem because it doesn't seem as if Greece can grow out of this,” Ms. Krosby said. “We look at it through the eyes of the market, and right now, the market seems to be OK with the notion of buying time. But you cannot change the math.”
