January 13th, 2012
05:23 PM GMT
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London (CNN) – European markets were given a final-hour fright Friday upon reports of an imminent downgrade for eurozone countries by ratings agency Standard & Poor’s (the influential credit assessors declined to comment when approached by CNN.)

Although largely expected, a cut to the creditworthiness of eurozone countries would be worrying - not least because this week's successful bond sales by Italy and Spain had led many an investor to believe the eurozone was “turning a corner” and getting a grip on its issues.

In the short-term such a move by one of the big three credit raters would immediately increase the cost of borrowing money on the bond markets for those countries affected.

Further down the line, it would also make it more difficult to raise money for the temporary and permanent stability funds set up to safeguard the euro zone and its single currency.

Already the EFSF has had little success in courting the Chinese for their cash. News of a downgrade would hardly whet the latter's appetite.

Thankfully for bean counters in Brussels and Berlin, media reports suggest Germany - eurozone paymaster-in–chief - will not be on the S&P list of cuts.

That leaves traders’ eyes firmly fixed on France, a country whose relationship with the credit ratings agencies (and the finance industry as a whole) has become increasingly fraught.

French President Nicolas Sarkozy has long bemoaned the role of ratings agencies throughout the eurozone crisis, saying their decisions to downgrade struggling nations only made a bad situation worse.

So sensitive is France about its triple A crown that in November it demanded sanctions after Standard & Poor's erroneously told some clients it had downgraded France (when it hadn't yet done so).

That said, today's downgrade talk is hardly a surprise. Back in December Standard & Poor's lowered its outlook on 15 eurozone countries, effectively earmarking them for a lower rating. Since then economists have been saying it's a question of when and not if.

Markets veteran Stephen Pope, MD of Spotlight Ideas, says official recognition of the eurozone's higher risk profile couldn't come too soon.

“At long last an agency placed the spotlight on the long standing systemic stresses that are pressuring the single currency region's credit standing,” he said. “Any action that S&P take to downgrade nations will not be before time.”

The question is, will the downgrades come before EU leaders host their first summit of 2012 at the end of the month? And after that, when will Moody's and Fitch follow suit?

soundoff (12 Responses)
  1. Seatle06

    Investors knew this was coming. No news really. The question should be why these US rating agencies lower France when Britain is in worse shape then France is. The fact that they accidentally released a report that France was lowered (2 months ago) should also be seen as criminal. These things are just not acceptable. Even China and Germany are saying these US rating agencies are obviously biased and should be limited with under more regulations. Remember all the Triple A ratings they were giving to US banks and Subprime mortgages before it all collapse. Who exactly got punished for that? Remember that 2 of the 3 are still giving the US triple A ratings to this day while the US is sitting on the Biggest Debt Pile in the history of the world. Now at over 15 Trillion and rising quickly.

    January 13, 2012 at 5:54 pm |
  2. streaky

    Seatle06 because the UK is in better financial shape than France, despite David Cameron doing everything he can to make that not true.

    Fitch explained the risk of France, quite properly, as this:

    "The fiscal space to absorb further adverse shocks without undermining its triple-A status has largely been exhausted"

    January 13, 2012 at 6:42 pm |
  3. Roast Beef

    Seatle06 – The UK is certainly not in worse shape than France. This is why David Cameron gave the shifty little one the middle finger.

    More importantly, we're also going to beat them at the European Football Championships this summer.

    January 13, 2012 at 7:40 pm |
  4. K.Mian

    if some checks are not placed on gambling in name of free market we are doomed

    lesson in free market economy which only few understand

    an independent financial advisor ;-
    - all different instruments of investment and stock exchange are just gambling joints or betting shops
    - when one says he has lost there is always another who has won, just like in a casino or betting shops.
    - Bio data of one such crook
    - -Xavier Rolet – CEO London stock exchange
    - -member board 115 similar betting shops
    - – chairman united Jewish Israel Appeal
    - ex Lehman Brothers and Goldman Sachs protege
    - wants to buy FTSE100
    - money does not vanish into thin air, mostly it has just changed pockets, of the same crooks.
    - they, also own the rating agencies like =Standard and Poor etc.
    - these criminals on one hand show loses in one sector of economy, and at the same time are ready with the looted money to be lent at high interest rates to needing countries and banks
    - these crooks assume the name of international private banks and have unlimited supply of looted money to lend, money earned from the gambling establishments i.e. called instruments of investment, this is their source to generate more money
    lending agencies like ECB, Bank of England and the bigger thieves like Federal Reserve are owned and run by the same money and media Mafia which is now controlling all so called western democracies and their leaders

    our own loveable Rupert Mudrock, owns the biggest gambling joint in the world, DJ index, and the rating agencies controlled by Financial Times.

    January 13, 2012 at 8:02 pm |
  5. Chris

    The total debt held by the UK (government, bank, and individual) is the highest out of every country in Europe.

    I suspect the reason they aren't being hammered like the other countries in the EU is that they still have control over their currency.

    January 13, 2012 at 11:26 pm |
  6. aboutbroker

    prepare for selling euro..


    January 14, 2012 at 8:50 pm |
  7. bridge

    France is toast and so is EU! better for usa who will profit economically from their decline

    January 14, 2012 at 9:01 pm |
  8. Goldenbelrg

    Hopefully most people will have realized by now that the constant downgrades and later improvements in outlook roller-coaster ride is nothing but the latest money-making scheme coming out of wall-street. Those geezers will never stop...

    January 17, 2012 at 1:06 pm |
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    January 27, 2012 at 12:59 am |
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