Moody's Italian downgrade from Irish Times & the delayed meeting of Sarkozy/Merkel.

The downgrade of Italy by three notches with a negative outlook is best covered from this link.

Attention from the markets will focus on the interest rate increases Italy will now incur and the state of the French Banks. Last evening it was reported some €80 billion of loans would be transferred from troubled Dexia to two state-owned French banks one of which is the equivalent of Britain's Post Office Savings Bank! Such arrangements cannot leave France's sovereign date rating unaffected for very much longer. One earlier report is here, which ends with these supposedly re-assuring paragraphs:

Local governments across France have found their taxpayers' investments at risk and Paris and Brussels are determined not to allow Dexia to fail.
But the CDC and La Poste, which manage funds from French small savers' tax free deposit accounts, are seeking to negotiate with the state a "very tight framework" for their involvement that would not expose the public to risk.
The sources added that said the CDC would not undertake any investment that would endanger its own triple-A credit rating.

The delay in a meeting between Chancellor Merkel and President Sarkozy, (who had been hinting it would be over the coming days,) has now been announced as coming just before the next EU summit on 17th October, thirteen days after its announcement, a clear sign that Germany seems content to let the French handle the current crisis on their own!