S&P�s decision to selectively downgrade nine Eurozone countries on Friday was broadly expected and priced in, although somewhat surprising in terms of timing and justification. The immediate implication for each member state should remain limited overall, in terms of both market pricing and bond eligibility at ECB repos, in particular. The EFSF, which remains on CreditWatch, basically has two options. It must either accept a drop in its lending capacity of about EUR180bn in order to keep its AAA rating; or it must accept a downgrade to AA+ to keep its EUR440bn capacity. EFSF cost of funds and market access matter the most, however, and it is not like the EFSF was able to raise large amounts of cash at AAA-equivalent levels of yields before the downgrade.

The ECB left its policy rates unchanged at today's meeting. The official statement still reflects an easing bias, in our view, although "substantial downside risks" are to be balanced with "tentative signs" of stabilisation in the economy. The near-term outlook for ECB rates will prove to be highly data-dependent. We still look for the ECB to ease further this year, but the pain threshold has likely edged higher and we now forecast a 25bp rate cut in March only, followed by another 25bp move in Q2, bringing the Refi rate to 0.50%.

Since the beginning of the Greek crisis in late 2009, it has become increasingly common to compare Greece today with Argentina's situation ten years ago. Given Argentina's post-crisis economic recovery, some go as far as to predict, or even recommend, that Greeks opt for an identical shock therapy by exiting from the euro zone, reintroducing a severely devalued national currency and going into a unilateral default. Nevertheless, comparisons are often misleading. We see several major differences that make the Greek situation unique and that require extreme caution when considering the best remedy to be used to end the crisis.

The West is facing a crisis that is mutating. In the beginning, excess debt in the private sector triggered a balance-sheet recession; then the decline in growth, in an environment of too loose fiscal policy management for too long, set off the sovereign crisis, which has compounded the mistrust in banks. In any case, economic policy "room for manoeuvre" (in the usual acceptance thereof) is limited. Over the next year, fiscal policy's ultimate goal will be the reduction of the public debt to GDP ratio; the only flexibility is perhaps the mix of short-term stimulus and a strong commitment in the medium term to orthodoxy from countries still benefiting from ample and stable government market liquidity.

The 1997 crisis has been steep. Forced to reform, the Indonesian economy has won in stability since then. The way it surmounted the 2009 global crisis without too much difficulty shows it. This should provide reassurance in a degraded international environment. Indonesia's economy is expected to grow by just under 6.5% this year, and could grow by around 5.5% in 2012. In the medium and long term, the country has significant potential. Demography is an undeniable source of economic vitality-provided GDP growth becomes more inclusive, which would call for dealing with shortcomings in education, infrastructures and governance, despite doubts in light of the political context. Still, Indonesia should nonetheless be able to join the BRICs within the next ten years.

After a challenging autumn, we are forecasting a winter recession in the Eurozone. Activity is expected to contract by -0.2% both in the fourth quarter of 2011 and the first quarter of 2012. Although the risks to our scenario are skewed to the downside, our forecast is based on a smaller adjustment in activity than in 2009.  Despite the current political dithering, the likelihood is that the authorities will end up by delivering a credible response in order to safeguard at all costs the integrity of the Eurozone.