S&P Downgrades 9 Euro Nations
Standard & Poor’s revealed the details of fresh downgrades for a handful of debt ratings on Friday, just hours after revealing plans to reduce a handful of eurozone debt ratings over the ongoing debt crisis in the region. Europe’s largest economy, Germany, was spared in S&P’s latest action, but No. 2 France and No. 3 Italy were both affected. France, along with Austria, had their AAA ratings, the highest rating given out by the agency. The ratings for Italy, Spain, Portugal and Cypress, meanwhile, had their ratings cut by two notches to BBB+, just two notches away from junk status.
Malta, Slovenia and Slovakia were also downgraded, by one notch. The good news is that Germany, Finland, the Netherlands and Luxembourg were all allowed to hang on to their AAA ratings, allowing at least a few eurozone nations, including its largest individual economy, to keep borrowing costs down. The immediate effect on markets was minimal on Friday, as investors have been expecting the downgrades for weeks, but the downgrades could make investors nervous, making it harder for the countries to sell bonds, and inflating their borrowing costs.
S&P cited several factors for its decision to downgrade European nations, including weakening economies, tightening credit conditions, and rising interest rates for many eurozone members. The agency also warned that many of the EU’s members are still in jeopardy of further downgrades if a solution to the sovereign debt crisis is not found soon.