Debt Burdens Weigh World Markets

from FT.com:

A toxic cocktail of negative economic and debt news caused a sharp slump in European bourses and US equity futures on Tuesday.
The dollar rallied on haven buying as traders reacted to heightened concerns above the ability of the Greek government to manage its fiscal deficit; fears that the Dubai debt problem was dragging on; and news that German industrial output had fallen in October.

from Marketwatch:

LONDON (MarketWatch) -- Credit-rating agency Moody's Investor Services on Tuesday warned that the United States and Great Britain may test the limits of their Aaa sovereign ratings due to deteriorating public finances.

"These are the Aaa countries whose public finances are deteriorating considerably and may therefore test the Aaa boundaries, but which display, in our opinion, an adequate reaction capacity to rise to the challenge and rebound," wrote Pierre Cailleteau, managing director of Moody's sovereign risk group, in the report.
Cailleteau divided the Aaa countries into three categories -- resistant, resilient and vulnerable.
The United States and Great Britain both fall in the "resilient" category, the report said.
"These countries are rated Aaa more because of their balance sheet flexibility than because of their current or projected debt levels over the next few years," Cailleteau wrote.

Key Principles to Fix the Financial System

The Future of Finance Initiative: Howard Davies explains his choice of key principles for fixing the fiscal system.

"Resistant" countries, such as Canada, Germany and France, were weakened by the crisis but started from strong fiscal positions. They don't face a lasting challenge to their economic model or a "massive risk of crystallization of contingent liabilities," the report said.
"While resistant, they are clearly not immune," Cailleteau said. "Debt may increase, but not to the extent of stretching affordability beyond a level consistent with a Aaa status."