Standard & Poor’s Cuts AAA Credit Rating For France
Another wave of credit downgrades has hit the Eurozone. S & P cut the credit worthiness of several European sovereigns, most conspicuously France, which saw its coveted AAA rating reduced to AA plus. Austria also lost its AAA rating, and Italy was reduced by two notches, now being rated by Standard & Poor’s at BBB plus.
Predictably, French Finance Minister Francois Baroin said “It’s not good news, but it’s not a catastrophe.” A statement of self-contradicting spin that will be unlikely to arouse confidence among sovereign wealth funds and private investors. But perhaps most alarmingly, with Germany now the only Eurozone economy retaining a AAA credit rating, and the German economy having contracted in Q4 of 2011, all these downgrades and somber economic trends undermine the supposed savior of the insolvent Eurozone countries, the so-called European Financial Stability Facility. How will the EFSB sell its bonds to generate capital lend to the fiscally most vulnerable members of the Eurozone? Things are looking increasingly gloomy in Europe, with no resolution for the sovereign debt crisis or economic downturn in sight. And yet, the politicos are still banking on the European Central Bank and its printing press as the savior of last result. What a thin reed to base hope of an economic miracle on.
