S&P cuts credit ratings of 9 EU countries
Rating agency downgrades rating score of France, Italy, Spain, Austria, Portugal, Cyprus, Malta, Slovakia and Slovenia
Ratings agency Standard & Poor's dealt a setback Friday to Europe's ability to fight off a worsening debt crisis by downgrading the government debt of France, Italy, Spain and Austria. But it kept Germany's at the coveted AAA level.
All told, S&P cut its ratings on nine eurozone countries.
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The downgrades could drive up yields on European government debt as investors demand more compensation for holding bonds deemed to be riskier than they had been. Higher borrowing costs would put more financial pressure on countries already contending with heavy debt burdens.
The rating agency ended France and Austria's triple-A status. It also lowered Italy's and Spain's by two notches and did the same for Portugal and Cyprus. S&P also cut ratings on Malta, Slovakia and Slovenia.
"In our view, the policy initiatives taken by European policymakers in recent weeks may be insufficient to fully address ongoing systemic stresses in the eurozone," S&P said in a statement.
France meets US' score
France's downgrade to AA+ lowers it to the level of US long-term debt, which S&P downgraded last summer.
S&P had warned 15 European nations in December that they were at risk for a downgrade.
France is the second-largest contributor behind Germany to Europe's financial rescue fund. The fund still has a rating of AAA. That means that it can borrow on the bond market at low rates.
Some analysts downplayed the impact of the downgrades.
"It's going to create bad headlines for a day or two," said Jacob Funk Kirkegaard, research fellow at the Peterson Institute for International Economics. But "there's no underlying new information ... This will be quickly forgotten."
still, the cut in the French credit rating may lead bond traders to raise borrowing costs for the financial rescue fund, said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott, a financial firm.
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