France, Austria and Italy - Downgraded In Credit Ratings Blitz

France, Austria and Italy have all had their credit ratings downgraded by ratings agency Standard & Poor's.
France and Austria now both hold AA+ ratings, while Italy, which formerly held a BBB+ rating, now finds itself on BBB.


More countries are expected to be downgraded in the next few hours.

Francios Barion-"half-surprised"

Speaking on France 2 television, Francois Baroin said his country's notification was a "half-surprise".
"It is not good news," he said, but insisted the country was taking the right direction.
"The markets had perhaps anticipated the move, which is why their reaction was moderated this afternoon."


The euro fell to a 17-month low on the currency markets amid early reports of the news - the latest in the eurozone crisis - and stock markets across the world also declined.


It is understood the agency will confirm the announcement after markets close in the US.

French President will hold crisis meetings.

French president Nicolas Sarkozy held crisis talks with key ministers after news of the downgrade emerged.


Other countries within the single market are also at risk of a downgrade by the prominent ratings agency, among them Slovakia.


Reuters columnist Peter Thal Larsen told Sky News: "If we are talking about expectations then clearly France is what we would consider to be most vulnerable to a potential downgrade."


A French downgrade would be significant due to the country's role as one of the AAA guarantors of the eurozone's rescue fund, the EFSF, which would in turn also need to be downgraded.


Germany would then become the only major AAA-rated economy underwriting the fund.
This would make it more difficult to raise funds to bail out weaker countries, like Italy and Spain, if the need arose.

Standard & Poor - Downgraded France, Italy and Austria's credit ratings with more to come.

But Mr Larsen added that the move by Standard & Poor's (S&P) would not be particularly surprising, as the ratings agency had put several eurozone countries, including Germany, on notice a few months ago.


He said the downgrades would provide a "reality check" to the markets that the eurozone's problems are nowhere close to being solved.


Germany, The Netherlands, Finland and Luxembourg are among the countries not believed to be affected by a downgrade.


The announcement is particularly bad news for Nicolas Sarkozy who faces presidential elections later this year and has staked much of his reputation on being the man to lead France out of the crisis.
Valerie Pecresse, a French government spokeswoman, told a television channel in the country: "France today is a safe investment, it can repay its debt and the news concerning our deficit is better than expected."


Last December, when rumours of a potential French downgrade began, politicians in the country reacted strongly, suggesting that any downgrade would be unjustified.


It was even suggested publically by one senior figure that Britain should be downgraded before France because it had "as much debt, more inflation, less growth than us and...credit is slumping".
Reports of a breakdown in talks between Greece and its banks to restructure its debts also fuelled fears of a default.

French credit rating downgrade

Standard Poor's imminent downgrade of eurozone economic giant France's triple-A credit rating has sent stocks sliding and the euro plummeting.

In Brussels, EU government sources told AFP the ratings agency had warned members of the bloc France would be downgraded by one notch, while fellow top-line creditors Germany, Luxembourg and the Netherlands would be spared.


 'The Standard Poor's downgrade (for France) is by one notch,' one of the sources said. The credit rating agency had indicated in December that a cut of two notches could have been applied to the eurozone's second biggest economy.



The downgrade could force France's borrowing costs up at a time when it has already been forced to impose austerity measures to control its deficit, and is a political humiliation for President Nicolas Sarkozy.

Sarkozy faces a tough re-election battle in less than 100 days and reportedly told allies last month: 'If we lose the triple-A, I'm dead.'

France's budget minister and government spokeswoman Valerie Pecresse refused to confirm the imminent downgrade, insisting: 'France is a safe investment.'
But opposition Socialist lawmaker Jean-Marie Le Guen branded the loss of the triple-A 'a triple failure for Sarkozy', amid charges from the left that the president's tax cuts had left France more exposed than its neighbours.


European leaders are due to meet in Brussels on January 29 to nail down details of a fiscal pact designed to reassure bond markets that their deficit reduction plans are on course and their debts safe.
Earlier this week, ratings agency Fitch offered markets reassurance that it did not plan to downgrade France's top triple-A credit rating in 2012, unless the country suffered major economic shocks.

But Standard Poor's still had the eurozone bloc under scrutiny and - while the firm did not confirm it was to act after markets closed on Friday - the reports seemed to have ended the optimism.

France had been on notice that its triple-A debt rating was on the line, amid fears over its large public deficit and its own banks' exposure to even riskier sovereign debt in eurozone partners Greece and Italy.
Earlier on Friday, Italy raised 4.75 billion euros at mostly lower rates in a bond auction, reflecting what was then still improved market confidence and European Central Bank efforts to boost eurozone liquidity.
German Foreign Minister Guido Westerwelle said he would travel to Greece on Sunday for talks on the crisis, taking with him a message of 'encouragement' and 'expectation', Berlin said.

Meanwhile, German Chancellor Angela Merkel's spokesman said she will host the leaders of Portugal, Sweden and Austria next week for informal talks on the eurozone debt crisis and fiscal integration, her spokesman said.
Borrowing by Spain's struggling banks from the European Central Bank hit a 17-month high in December as it offered cheap long-term loans to the eurozone, the Bank of Spain said.