Nine European countries downgraded by Standard and Poor - THE Eurozone has been engulfed in a new crisis after credit agency Standard and Poor's downgraded nine countries, including France.
The cuts led to a drop in the euro and share prices while the European Central Bank was forced to buy bonds to prop up the Italian economy.
The agency cut the credit ratings of Cyprus, Italy, Portugal and Spain by two notches and France, Austria, Malta, Slovakia and Slovenia by one notch.
But the significant cut was to the rating of France, which dropped from AAA to AA+, leaving Germany as the only major economy in the eurozone with a AAA credit rating. Italy went from A to BBB+, Spain from AA- to A, Austria from AAA to AA+, Portugal BBB- to BB, Malta from A to A-, Cyprus from BBB to BB+, Slovakia from A+ to A and Slovenia from AA- to A+.
S&P said it was "primarily driven by insufficient policy measures by EU leaders to address systemic stresses".
France, Spain, Italy among eurozone nations downgraded by Standard and Poor's - "We believe that there is a risk that reform fatigue could be mounting, especially in those countries that have experienced deep recessions and where growth prospects remain bleak," it said in a statement.
The downgrade of France, the world's fifth-largest economy, marks the second high-profile downgrade of a top tier triple-A nation by S&P in less than six months, after it stripped the US of the ranking and sparked a wave of controversy in August, 2011.
France continues to hold triple-A ratings from Fitch Ratings and Moody's Investors Service. The country
France attempted to blunt the impact of the impending news, which came after US markets closed. Finance Minister Francois Baroin went on prime-time television in France and said that while the country would have preferred to keep the rating, the downgrade is not a catastrophe. "It is not ratings agencies that dictate French policy," Mr Baroin said. "It is clearly (related) to the governance of the eurozone and to its instability."
...Although S&P left Germany's triple-A rating unscathed, the company's assessment offers stark evidence of the extent to which many industrialised countries have been relying on debt during both periods of economic expansion and contraction, as they pursued the increasingly elusive goal of buoyant growth and full employment. France, for example, hasn't recorded a balanced budget since 1974.
S&P's decision means that Europe's rescue fund, the European Financial Stability Facility, could lose the triple-A rating it needs to borrow cheaply and lend to ailing euro-zone governments. As France is the second-biggest contributor to the fund's guarantees, the chances are greater that the EFSF's capacity will be crimped or its borrowing costs will rise.
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