It is really not possible to make no mention in this column of the recent and historic downgrading of the US Federal government’s credit rating from AAA to AA+ by ratings agency Standard & Poor’s. Of course, since then, another ratings agency, Fitch (which is apparently French owned) has maintained its rating of the US at AAA.

But Standard & Poor’s downgrade came shortly after the US, incredibly, came within 24 hours of a default, due to irresponsible politicking in Washington DC. And the US ratings agency was clearly trying to knock the heads of America’s bickering politicians together to try to get them to honestly face up to the crisis in which their country finds itself.

In this, it did not succeed, at least in the immediate aftermath of its announcement. Democrats took refuge in citing the ratings agency’s past mistakes. These were real and serious enough. But just because Standard & Poor’s has been wrong in the past doesn’t automatically mean it is wrong now. Republicans took refuge in taking cheap pot shots at President Barack Obama’s administration. It was pretty depressing, giving the impression that a great country was being run by midgets.

As for Fitch, it should be pointed out that its confirmation of Washington’s AAA status was not unqualified. The company indicated that it expected that US leaders would succeed in reducing the country’s debt and deficit.

The White House and Congress have agreed to $900-billion in spending cuts and a bipartisan Congressional committee has been set up to agree, by November, to cut another $1.5-trillion (yes, trillion) in government spending. But if this committee cannot reach agreement, Fitch warned that it could change its outlook on the US credit rating to negative, which would indicate a greater than 50% probability of a downgrade within the following two years.

America’s rapid political cycle – there are Congressional elections every two years, in which all seats in the House of Representatives and one-third of the seats in the Senate (Senators have a six-year term) – bedevills the negotiation process, as incumbents and candidates manoeuvre for short-term electoral advantage. And next year’s elections include a Presidential vote, so the political gamesmanship, posturing and pandering are even more intense at precisely the worst time.

But if America presents a depressing picture, the eurozone is far worse. Things have been and are moving too fast to sum up the situation – any such summary will be obsolete by the time this column is published. Suffice to say the leaders of the countries which share the euro as their currency have continually failed to meet the rapidly mutating challenges posed by the current crisis.

Among independent experts, analysts and commentators there appears to be agreement that there are only two real escape routes. Either the eurozone countries create a genuine federation, or the euro is split into at least two currencies. However, on the one hand, there is no democratic mandate in any eurozone country to abolish national sovereignty and create a new State. On the other, the eurozone’s leaders continue to refuse to countenance the possibility of the single currency being broken up.

So the eurozone stumbles from one hopelessly inadequate response to another, and the crisis widens and deepens. Last week, it emerged that Germany’s economic growth rate for the second quarter of this year was only 0.1%. The figure for the Netherlands was the same, while in France there was no growth at all. (Last month, the British were worried when it was revealed that their economy had grown by only 0.2% in the second quarter: that figure now looks relatively good!)

There is a real danger of recession. However, we are in a new world. The Bric countries (Brazil, Russia, India and China) are emerging as engines of global economic growth.

To digress, when South Africa joined the Bric four in a loose political grouping that became Brics, I expressed the fear that, globally, analysts, commentators and busi- nesspeople would simply ignore South Africa’s accession to the group and focus on the original Bric four. This is exactly what is happening. Joining the Bric four has not increased South Africa’s profile at all. It may even be reducing it.

Anyway, according to German economist Michael Hüther, the Bric four will be jointly responsible for 30% of the global economy by 2015, whereas the eurozone will only account for 13%. The trouble is we’re in 2011. While South Africa’s financial situation and institutions are sound, the country lacks the large domestic markets that the Bric four and other countries, such as Mexico and Indonesia, have.

South Africa needs export markets, and while China is currently the country’s number one export market, second spot is taken by the US, third by Japan, fourth by Germany and seventh by the Netherlands. In fact, six of South Africa’s top 20 export markets are in the eurozone. Two others are noneuro European countries – the UK (fifth) and Switzerland (eighth). (The others are India, ranking sixth, South Korea ninth, Mozambique tenth, Zimbabwe 12th, Zambia 14th, Taiwan 16th, Hong Kong 17th, Malaysia 18th and the United Arab Emirates 19th. These rankings are from the Department of Trade and Industry figures for exports during the first five months of this year.)

And what does South Africa export to China? Mainly raw materials.

In sharp contrast, most South African automotive industry exports go to the European Union (EU – both eurozone and noneurozone countries), with the US and North America in second place. The EU has taken 49.5% of South African exports in this sector so far this year, with North America accounting for another 22.1%.

So a failure by the leaders of the US and the eurozone to get a grip on their problems, leading to a return to recession, is going to hit the real South African economy hard – except, perhaps, for the mining sector.

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