Tags: S&P | EU | Europe | Financial | Crisis

S&P May Downgrade European Bailout Fund AAA Rating

Tuesday, 06 Dec 2011 09:20 AM

The European Financial Stability Facility may lose its top credit rating if any of the bailout fund’s six guarantors face a downgrade from AAA, Standard & Poor’s said.

“We could lower the long-term credit rating on EFSF by one or two notches if we were to lower the AAA sovereign ratings, which are currently on CreditWatch, on one or more of EFSF’s guarantor members,” S&P said in a statement today.

At the same time, the ratings company said it “could affirm the AAA ratings on EFSF and its issues if we affirm the rating on all six of EFSF’s guarantor members currently rated AAA.” Germany, France, the Netherlands, Finland, Austria and Luxembourg are the top-rated nations backing the fund.

Stocks, French bonds and the euro fell after S&P said late yesterday that it may cut the debt grade of 15 euro nations, including Germany and France. The decision on whether to do so will depend on the outcome of a European Union leaders’ summit on Dec. 9, S&P said.

German Finance Minister Wolfgang Schaeuble said today that the downgrade warning will help force Europe to ratchet up efforts to resolve the two-year old crisis this week.

“We could also affirm the ratings if we were to lower the current AAA ratings on one or more guarantor members, but had evidence that the EFSF guarantor members were implementing further credit enhancements that were in our view sufficient to mitigate the relevant guarantor members’ reduced creditworthiness,” the S&P statement said today.

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