S&P downgrades credit ratings of European nations
Source: Agencies |
January 15, 2012, Sunday
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STANDARD & Poor's swept the debt-ridden European continent with punishing credit downgrades on Friday, stripping France of its coveted AAA status and dropping Italy even lower. Germany retained its top-notch rating, but Portugal's debt was consigned to junk.
In all, S&P, which took away the US AAA rating last summer, lowered the ratings of nine countries, complicating Europe's efforts to find a way out of a debt crisis that still threatens to cause worldwide economic harm.
Austria also lost its AAA status, Italy and Spain fell by two notches, and S&P also cut ratings on Malta, Cyprus, Slovakia and Slovenia.
The downgrades on more half of the countries that use the euro could drive up yields on European government debt as investors demand more compensation for holding bonds deemed to be riskier. Higher borrowing costs would put more financial pressure on countries already contending with heavy debt burdens.
"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.
Stocks fell on Friday as downgrade rumors reached the trading floors of Europe and the United States.
But the declines were nothing like the wrenching swings of last summer and fall, when the debt crisis threw the markets into turmoil.
Earlier Friday, the euro hit its lowest level in more than a year and borrowing costs for European nations rose.
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."
In all, S&P, which took away the US AAA rating last summer, lowered the ratings of nine countries, complicating Europe's efforts to find a way out of a debt crisis that still threatens to cause worldwide economic harm.
Austria also lost its AAA status, Italy and Spain fell by two notches, and S&P also cut ratings on Malta, Cyprus, Slovakia and Slovenia.
The downgrades on more half of the countries that use the euro could drive up yields on European government debt as investors demand more compensation for holding bonds deemed to be riskier. Higher borrowing costs would put more financial pressure on countries already contending with heavy debt burdens.
"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.
Stocks fell on Friday as downgrade rumors reached the trading floors of Europe and the United States.
But the declines were nothing like the wrenching swings of last summer and fall, when the debt crisis threw the markets into turmoil.
Earlier Friday, the euro hit its lowest level in more than a year and borrowing costs for European nations rose.
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."
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