S&P downgrades France, Austria; spares Germany
2012-01-16 17:19:08
Ratings agency Standard & Poor's said late Friday that it has lowered the long-term ratings on Cyprus, Italy, Portugal and Spain by two notches; lowered the long-term ratings on Austria, France, Malta, Slovakia, and Slovenia by one notch; and affirmed the long-term ratings on Belgium, Estonia, Finland, Germany, Ireland, Luxembourg and the Netherlands.
All ratings have been removed from CreditWatch, where they were placed with negative implications on December 5, except for Cyprus, which was first placed on CreditWatch on August 12.
S&P lowered France's and Austria's long-term sovereign credit ratings on to 'AA+' from 'AAA', Spain's to 'A' from 'AA-, Slovenia's to 'A+' from 'AA-', Italy's to 'BBB+' from 'A', Portugal's to 'BB' from 'BBB-', Malta's to 'A-' from 'A', Cyprus' to 'BB+' from 'BBB' and Slovakia's long-term sovereign credit ratings to 'A' from 'A+'.
At the same time, S&P affirmed the coveted 'AAA' ratings of Germany, Finland, Luxembourg, Finland and the Netherlands as well as the 'BBB+' rating of Ireland and 'AA-' rating of Estonia.
The ratings agency said that of the 16 countries reviewed, all except Germany and Slovakia have negative outlooks.
S&P said that Friday's rating actions are mainly driven by its assessment that the policy initiatives taken by European policymakers in recent weeks may be insufficient to fully address ongoing systemic stresses in the eurozone.
"The outcomes from the EU summit on Dec. 9, 2011, and subsequent statements from policymakers, lead us to believe that the agreement reached has not produced a breakthrough of sufficient size and scope to fully address the eurozone's financial problems," S&P said in a statement.
The ratings agency said it affirmed the ratings on the seven eurozone sovereigns that its believe are likely to be more resilient in light of their relatively strong external positions and less leveraged public and private sectors.
The widespread downgrade, particularly that of France, could have far-reaching implications, potentially complicating the ability of Europe's bailout fund, the European Financial Stability Facility, to provide support to struggling countries.
The rating actions is also expected to have a strong impact on the global financial markets. Markets in Europe and the U.S. have already suffered earlier Friday after unconfirmed reports about the downgrades sneaked in.