Is this the beginning of the end?
S&P announced a reduction of France from AAA to AA.
As it turns out, S&P's December 5th warning was not addressed to satisfy fears in the market.
What does a downgrading of France really mean?
It means that a market fatigue has reached its maximum. Patience has run out over the last two years while waiting for a notable reaction for handling the euro.
We've had more than enough telephone calls between country leaders. We've had more than enough long Euro summits. And we've had more than enough big announcements. The crisis was still not handled.
Basic economics should not be forgotten. The euro is a single currency, which represents productive models of 17 different countries. All of them very much bound by rather sticky and high productivity costs.
Since the early 1990s, the criticism of economists has been for the European zone's productive base to be deregulated and simplified so that its cost-base would be reduced and its productivity increased. In addition to this, the inability or unwillingness for the Euro zone to establish a common fiscal structure and a growing indebtedness resulted in a crisis that started in Greece and today touches France (after having touched Ireland, Spain and Portugal).
Now with the very possible French downgrade, the core of the euro is at stake.
So what is really needed?
We need to prove that the European Union is made of countries with a flexible yet robust productive base capable to innovate, attract new ideas and boost entrepreneurship.
What does this mean for Greece?
It's a reality check through a shock that may very possibly postpone discussions about national elections in Greece. Such discussion may generate further political instability. The outcome of the election may not generate a one-party government. Such scenarios increase stress in the euro zone and the market as political instability is not something to take lightly.