S&P Downgrades Credit Rating of EFSF Bailout Fund
January 16, 2012
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Europe Update: S&P Downgrades Eurozone’s EFSF (Bailout Fund)
After downgrading the credit ratings of nine Eurozone countries on Friday, Standard & Poor’s today downgraded the credit rating of the EFSF (European Financial Stability Facility) bailout fund.
Citing the downgrades of both France and Austria, S&P downgraded the EFSF rating to AA+ from AAA.
"We consider that credit enhancements that would offset what we view as the now-reduced creditworthiness of the EFSF's guarantors and securities backing the EFSF's issues are currently not in place," the S&P statement said.
According to Reuters, the EFSF was set up by the 17 Eurozone governments that utilize the euro currency in May 2010 and has so far been used to provide emergency loans to Ireland and Portugal.
With only four AAA rated countries left of the seventeen, analysts fear that the lending capacity, currently at €440 billion, could be reduced.
However, in a statement Monday, an EFSF official said that the downgrade would not affect its lending capacity due to the fact that the bailout fund’s short-term rating remained at the top of S&P’s scale.
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