As reaction continues following Standard and Poor’s (S&P) placement 15 European Union members on its negative watch list this week just as markets were starting to have faith in the German- and French-led measure to clean up the EU’s ongoing debt and monetary problems, it seems the markets haven’t had much of a reaction. That could change following a two-day EU summit that ends Friday.

Still, what is the actual impact of all this? It’s not much, for now, says Hans Belsak, president of S.J. Rundt & Associates. However, the key words are “for now.”

 “For now, the decision of S&P does not have much of an impact, as it merely recognizes what the markets and investors are well aware of,” he told NACM. “But it does highlight the importance of this week’s European summit meeting and of the ongoing efforts by both Germany and France to move Europe toward greater fiscal integration. If they fail, and if the nervousness in the markets gets worse, the consequences could be calamitous.”

Belsak noted that dissolution, should that worst case scenario arrive in the near future of the Euro zone, would result in “an incredible mess” both in Europe and abroad.

The U.S. would suffer extensive collateral damage, given the exposure of many U.S. financial firms,” Belsak said. “There would be a run into U.S. Treasuries as a ‘safe bet’ but, even so, U.S. financial firms would be forced to scramble for liquidity as European markets freeze up.”

Brian Shappell, NACM staff writer