France, Austria and seven other Eurozone countries have had their credit ratings downgraded by the rating agency Standard & Poor’s.
Germany – Eurozone’s largest economy – was spared.
German Finance Minister Wolfgang Schäuble recognized: “I think that we are all closely knit and therefore we are not indifferent about it. However, we are collectively going down the same road. You also saw that Italy and Spain were judged more positively by the markets after the decisions which were made. In the past days France received different assessments from various agencies. France is on the right path.”
The downgrade of France from its AAA status could have a knock-on effect on the eurozone’s current bailout fund, the European Financial Stability Facility, as France is a major contributor and its borrowing costs would rise.
In December, S&P placed the ratings of 15 eurozone countries on credit watch negative – including those of top-rated Germany and France, the region’s two biggest economies – and said “systemic stresses” were building up as credit conditions tighten in the 17-nation bloc.
Since then, the European Central Bank has flooded the banking system with cheap three-year money to avert a credit crunch.