(eToro Blog) The rumor which spread earlier that Standard & Poor’s credit rating agency had downgraded France’s credit rating has now been reported by French television. Attempts to contact a representative from the French government have been thus far unsuccessful.
Late last year, S&P had cautioned the Eurozone’s leadership that a downgrade of several of the bloc’s governments would be forthcoming if they didn’t quickly and credibly address the ongoing fiscal crisis. Despite the cautionary advice, the news will surely not sit well with the French President, Nicolas Sarkozy, who has made near herculean efforts to ensure that the country would maintain its sterling credit rating.
With the downgrade, that leaves Germany as the largest AAA underwriter of the European Financial Stability Facility; Finland, Luxembourg and the Netherlands would also retain their AAA rating, and the “stable” outlook would remain unchanged.
Analysts point out that the efforts to increase the EFSF firepower through borrowing efforts are reliant on not just Germany, but France as well. A downgraded France will make it that much more difficult to secure the additional funding for the facility which would support the Eurozone’s more vulnerable economies.
Besides France, Austria’s credit rating has also been lowered, a fact which was confirmed by a government official. S&P has lowered Austria’s credit rating to AA plus, with a negative outlook. S&P has cited the country’s close economic and financial ties to cash-strapped Italy and Hungary as the reasons behind the downgrade.
The brief rally that the Euro had seen following successful bond auction in Spain and Italy has now eroded. The EUR/USD pair is lower at 1.2674, and sentiment on the eToro trading platform is dominated by bears. All of the European bourses closed in the red and Wall Street appears to be following.
Copyright 2012 eToro Blog
