"FRIDAY THE 13TH" FOR THE EUROPEAN ECONOMY

They say the way you spend New Year's Eve is the way you will spend the rest of the year. And they also say that the Year of the Dragon usually sees crucial events for humanity. And they also say that when the 13th day of a month falls on a Friday, it's a "black day".

Whether one believes in omens or not, it is their own business. But that the first "Friday the 13th" of the Year of the Black Water Dragon was really black for Europe is a fact. As if on purpose, in order to enhance the effect of its decision, exactly on this day, the international rating agency Standard & Poor's (S & P) downgraded the sovereign credit rating of nine eurozone countries, including France, which changed its maximum AAA to AA+. The long-term sovereign credit ratings of Italy, Spain, Cyprus and Portugal were downgraded by two notches, and Austria, Malta, Slovakia and Slovenia by one notch.

According to the agency, the changes reflect the opinion of S & P experts that the initiatives of the leaders of eurozone countries and EU bodies are not enough for compensating for adverse effects. The main negative factors that affected the downgrading were: the deterioration in credit conditions, increasing risks for a growing number of eurozone countries, the deterioration in economic growth projections, as well as the lack of a consolidated position to overcome the crisis among all EU members.

Democratic Europe took this decision, to put it mildly, with indignation: European Commissioner for Economic and Monetary Affairs Olli Rehn said that despite the measures that were taken, this decision is "unreasonable". He stressed that the currency union is well aware of its problem areas and has already made considerable progress in overcoming them. "Convinced that the time for the announcement was not chosen by chance, I want to express regret at the unjustified decision," Rehn said.

Cyprus President Demetris Christofias, in turn, complained that the rating was downgraded incorrectly and exactly at the time when his country's economy was just about to get up from its knees (probably immediately after receiving the first tranche of 2.5 billion euros from Russia). German Foreign Minister Guido Westerwelle offered to do away with the hegemony of US rating agencies by creating Europe's own authentic agencies.

Indeed, the decision of S & P to downgrade the ratings was strangely taken at a time when investors began to hope for a favourable outcome of the European crisis. The profitability of Italian and Spanish government bonds has been moving farther and farther from the critical levels in recent days, while funds have been easy to attract and beyond expectations and tensions have been subsiding.

Now, they will most likely have to forget it - many pension and investment funds invest their money, focusing on the evaluation of the "big troika" of agencies (other than S & P, it is also Moody's and Fitch), and after such a "massacre" of the ratings, a huge mass of securities ceased to meet their reliability criteria.

What's more, the market reacted immediately. The euro fell nearly by a cent: if on 12 January, it was offered for $1.28, on Friday evening, 13th January, it dropped to $1.265. At the same time, the demand for US bonds (Treasuries) suddenly increased - investors abandoned euro assets, quickly moving onto dollars and other defensive assets.

On top of all the "Black Friday surprises", the negotiations on the restructuring of Greece's debt with private banks failed, which brought the threat of a default in the country closer by one more step. In any case, this fact speaks, on the contrary, in favour of the correctness of the decision of S & P - no matter how hard Europe tries and what austerity plans and programmes it adopts, it will be impossible to move the "crisis cart" off the ground - there are clear signs of deterioration.

By the way, just a couple of days after the "rating shock", this was indicated by the authoritative International Monetary Fund. The special adviser to the IMF managing director, David Lipton, said that if the situation in Europe continues to deteriorate, no country of the region will remain immune and the crisis will inevitably spread to other states.

Naturally, this is the worst-case scenario for economic developments this year. If a crisis panic envelopes the world, Azerbaijan will not be able to avoid some of its influence. Not least because 43 per cent of Azerbaijan's total trade turnover falls to these nine eurozone countries targeted by S & P. Among the first ten countries to which Azerbaijan exports its products, Italy and France take first and second places respectively. Among the first 12 countries in terms of investment in Azerbaijan are 7 European countries (including France and Italy), which account for about 56 per cent of all foreign capital investments in the country. And besides that, 64.81 per cent of the assets of the State Oil Fund are in European countries. Plus, if you consider that the recession and the downturn in global demand may lead to lower oil prices, not a very rosy picture emerges at first glance.

But, in fact, there will be no reasons for exaggerating the situation for Azerbaijan this year: the Azerbaijani economy is ready for global and local shocks, according to the government. And there are strong arguments for that.

Azerbaijan's economy has trebled over the past eight years, the likes of which the history of the world economy has never seen. Azerbaijan's budget for 2012 also formed against the background of very complex global processes, which affected all the world's leading economic power centres. The government's actions to curb the process of the Eurobonds entering the market were timely, and the country will not face the problem of securities cheapening due to investors' prudence.

The Central Bank of Azerbaijan is also confident that against the global background, Azerbaijan's economy looks fairly stable and convincing. "If you look at the crisis years, in 2009-2011, the country's economy grew by 5 per cent per year on average. In view of world developments, it is a relatively high economic growth," the head of the CBA Board, Elman Rustamov, said.

However, this does not mean that Azerbaijan should turn a blind eye to "global challenges" - if the country wants to keep its economy stable in the long-run, it must immediately respond to these challenges. And such steps are already taking place. For example, we can indicate the recent decision to include Turkey and Russia on the list of countries in whose assets the funds of the investment portfolio of the State Oil Fund of Azerbaijan can be invested. There are also other examples of preventive measures.