S&P Downgrades Nine Eurozone Countries, Including France
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They finally did it.
After warning about such a move for a month, Standard & Poor's pulled the trigger and downgraded nine Eurozone countires, most notably France.
S&P 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.
The rating agency said the action by policymakers in recent weeks will "likely be insufficient to fully address ongoing systemic stresses in the eurozone".
Stresses to the system, cited by S&P are: (1) tightening credit conditions, (2) an increase in risk premiums for a widening group of eurozone issuers, (3) a simultaneous attempt to delever by governments and households, (4) weakening economic growth prospects, and (5) an open and prolonged dispute among European policymakers over the proper approach to address challenges.
The firm said it sees borrowing rates for certain countries remaining high, credit tight and economic growth may further decelerate.
Even with today's action, S&P said the long-term ratings on Austria, Belgium, Cyprus, Estonia, Finland, France, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovenia, and Spain are negative, meaning there is at least a one-in-three chance that the rating will be lowered again in 2012 or 2013.
Specifically on France, S&P said: "The downgrade reflects our opinion of the impact of deepening political, financial, and monetary problems within the eurozone, with which France is closely integrated."
The full S&P statement can be found here.
After warning about such a move for a month, Standard & Poor's pulled the trigger and downgraded nine Eurozone countires, most notably France.
S&P 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.
The rating agency said the action by policymakers in recent weeks will "likely be insufficient to fully address ongoing systemic stresses in the eurozone".
Stresses to the system, cited by S&P are: (1) tightening credit conditions, (2) an increase in risk premiums for a widening group of eurozone issuers, (3) a simultaneous attempt to delever by governments and households, (4) weakening economic growth prospects, and (5) an open and prolonged dispute among European policymakers over the proper approach to address challenges.
The firm said it sees borrowing rates for certain countries remaining high, credit tight and economic growth may further decelerate.
Even with today's action, S&P said the long-term ratings on Austria, Belgium, Cyprus, Estonia, Finland, France, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovenia, and Spain are negative, meaning there is at least a one-in-three chance that the rating will be lowered again in 2012 or 2013.
Specifically on France, S&P said: "The downgrade reflects our opinion of the impact of deepening political, financial, and monetary problems within the eurozone, with which France is closely integrated."
The full S&P statement can be found here.
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