Eurozone rescue fund faces loss of AAA rating

 

The top rating of the European Financial Stability Facility (EFSF) was threatened by the downgrade of two of its guarantors, France and Austria, on Friday evening. The decision, by ratings agency Standard & Poor’s (S&P), could wipe up to €170bn (£140bn) from the EFSF’s effective firepower, jeopardising its ability to bail out troubled eurozone economies. S&P placed the EFSF on negative watch in December and yesterday said it would publish an opinion on its rating “very shortly” in light of the country downgrades. John Chambers, the chairman of S&P’s sovereign rating committee, said the EFSF could retain its AAA rating if Germany and the remaining top-rated guarantors increased their commitments. “If you’ve lost two of the six AAA guarantors, either they need to increase the backing from the four remaining AAA guarantors or they need to raise some cash buffers,” he said. But Mrs Merkel poured cold water on that outcome yesterday, insisting she saw “no need to change anything regarding the EFSF” and that she “was always of the opinion that the EFSF doesn’t necessarily need a triple-A rating”.