NEW YORK, (Reuters) – Standard & Poor’s stripped France of its top AAA rating yesterday and carried out a mass downgrade of half the nations in the euro zone, a move that may complicate European efforts to solve a two-year old debt crisis. Germany, the bloc’s largest economy, was spared. Nine of the 17 members of the euro area had their credit ratings cut, with Austria joining France in losing its AAA status. Those two, along with Malta, Slovakia and Slovenia had their ratings cut by one notch, while Italy, Portugal, Spain and Cyprus suffered two-notch downgrades. S&P said it feared that initiatives European policymakers have taken to tackle the debt crisis “may be insufficient to fully address ongoing systemic stresses in the euro zone.” Among the stresses facing the euro zone are tightening credit conditions and rising interest costs for a variety of euro zone debt issuers and weakening economic growth, it said.
At a summit on Dec. 9, EU leaders secured agreement on drafting a new treaty for deeper economic integration in the euro zone, but the chances for more decisive measures to stem the debt crisis remain uncertain.
Yesterday’s decision may add to the debt problems as it is likely to increase euro zone borrowing costs across the board.
The move may trigger a series of downgrades of large European banks, companies and government entities.
This may include the European Financial Stability Facility, or EFSF, the fund created to rescue troubled euro zone countries, and the European Union.
