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Eurozone nations face S&P downgrade
BayBak, Azerbaijan | 495 days ago | Friday, 13th January , 2012 , 19:43 [pm] | International
|.|| Eurozone governments are bracing for new debt-crisis turbulence after Standard & Poorâ€™s, the rating agency, told them it would downgrade two of the eurozoneâ€™s six triple A nations.
One official told the
Eurozone governments are bracing for new debt-crisis turbulence after Standard & Poorâ€™s, the rating agency, told them it would downgrade two of the eurozoneâ€™s six triple A nations.
One official told the Financial Times that France and Austria were due to be downgraded but this was not confirmed by either the agencies or the governments.
S&P plans to downgrade France and Austriaâ€™s rating to AA+, the official said, leaving Germany as the only large triple A country underwriting the triple A rated eurozone rescue fund, the European Financial Stability Facility.
A government source in Vienna confirmed that Austriaâ€™s rating would be downgraded by S&P to AA plus from triple A with a negative outlook, citing the countryâ€™s economic and financial ties to Italy and Hungary. French officials could not be reached for comment.
News of the impending downgrade hit the euro, reversing gains made after better than expected sovereign debt auctions. The currency was down 1 per cent against the dollar at 1.2699 in mid-afternoon trade.
In Athens, talks over restructuring Greeceâ€™s debt broke down, raising the prospect that Greece could become the first developed country in more than 60 years to undergo a full-scale default on its debt.
S&P warned the eurozoneâ€™s six triple A nations and nine others that it had put their creditworthiness on review in December as a result of the debt crisis and the worsening economic outlook.
Since that warning, officials said, S&P had decided to leave the ratings of Germany, the Netherlands, Finland and Luxembourg unchanged at triple A, with their outlook unchanged at â€œstableâ€.
But one official called S&Pâ€™s move â€œworse than a blanket downgradeâ€ as it could call into question the construction of the EFSF, which depends on Germany and France.
This could make it harder for the EFSF â€“ which plans to raise â‚¬1.5bn from a bond sale on Tuesday â€“ to arrange financing in the markets for its aid packages for Ireland, Portugal and Greece, the official said.
The unexpected collapse of the Greek debt restructuring talks in Athens represented a double blow for Europe, just a day after the European Central Bank said it had seen signs of â€œtentativeâ€ economic stabilisation.
Lead negotiators for Greek bondholders said the latest offer made by Athens â€œhas not produced a constructive consolidated responseâ€ from â€œall partiesâ€ â€“ a clear reference to International Monetary Fund conclusions that bondholder losses must be increased significantly or a second Greek bail-out would have to be bigger than the agreed â‚¬130bn.
The euroâ€™s slide on Friday triggered a broad sell-off across risk assets as tradersâ€™ earlier hopes faded that the eurozone fiscal crisis was easing.
The Eurofirst 300 index of Europeâ€™s largest companies had climbed up to 0.8 per cent earlier in the day but news of the imminent downgrades erased those gains and the gauge was down 0.8 per cent by late afternoon in London.
Debt markets also gave up earlier optimism. Spain and Italyâ€™s benchmark 10-year bond yields climbed to 5.17 per cent and 6.64 per cent respectively while Franceâ€™s 10-year borrowing costs edged up 6 basis points to 3.08 per cent.ft, Voice of a Nation