Weekly Topic: Rating Agencies Downgrade Euro Zone & Then Some
Eurozone Credit Downgrade & Then Some
Ratings agencies which just last year were threatening to cut the USA's top credit rating (and which one did), just followed through on another threat: they have chopped away at the ratings of several of the largest European economies, with warnings of potentially more to come.
Now, as if to add insult to injury, credit rating agency Standard & Poor's has gone one better: they have just downgraded the credit rating of the Euro Zone Rescue Fund!
CNBC
S&P Downgrades Euro Zone Rescue Fund by One Notch
Rating agency Standard & Poor's said Monday it has downgraded the creditworthiness of the euro zone's rescue fund by one notch to AA+, putting the fund's ability to raise cheap bailout money at risk.
The downgrade follows ratings cuts for triple-A-rated France and Austria, whose financial guarantees were key to the creditworthiness of the European Financial Stability Facility...
Once another big agency cuts the EFSF's rating, the euro zone faces a stark choice. Either the fund starts issuing lower-rated bonds - and accepts higher borrowing costs - or its remaining triple-A contributors increase their guarantees.
So far, Germany, the biggest of the four triple-A economies in the euro zone, has ruled out boosting its commitments to the fund, and increases also appear politically difficult in the Netherlands and Finland.
Another option would be to accept that the EFSF can give out fewer loans...
Poll Euro Zone Downgrades
Ratings agencies which just last year were threatening to cut the USA's top credit rating (and which one did), just followed through on another threat: they have chopped away at the ratings of several of the largest European economies, with warnings of potentially more to come.
Now, as if to add insult to injury, credit rating agency Standard & Poor's has gone one better: they have just downgraded the credit rating of the Euro Zone Rescue Fund!
CNBC
S&P Downgrades Euro Zone Rescue Fund by One Notch
Rating agency Standard & Poor's said Monday it has downgraded the creditworthiness of the euro zone's rescue fund by one notch to AA+, putting the fund's ability to raise cheap bailout money at risk.
The downgrade follows ratings cuts for triple-A-rated France and Austria, whose financial guarantees were key to the creditworthiness of the European Financial Stability Facility...
Once another big agency cuts the EFSF's rating, the euro zone faces a stark choice. Either the fund starts issuing lower-rated bonds - and accepts higher borrowing costs - or its remaining triple-A contributors increase their guarantees.
So far, Germany, the biggest of the four triple-A economies in the euro zone, has ruled out boosting its commitments to the fund, and increases also appear politically difficult in the Netherlands and Finland.
Another option would be to accept that the EFSF can give out fewer loans...
Poll Euro Zone Downgrades