Standard & Poor’s Downgrades European Bailout Fund

If financial doom and gloom is your thing, you’re in luck.  Credit ratings agency Standard & Poor‘s has just downgraded its long-term credit rating on the European Financial Stability Facility (EFSF), otherwise known as the European bailout fund, from triple-A to double-A-plus.

The move was pretty much expected after the ratings agency downgraded most of the euro-zone over the weekend.

On Friday, S&P took away France’s and Austria’s prized triple-A rating.  It also slashed ratings on seven other countries, including Italy and Spain.

Germany, however, held onto its triple-A rating.

Many knew this day was coming.  Last month, Standard & Poor’s warned that an EFSF downgrade would likely follow any similar downgrades in the euro-zone.

Following the announcement, the EFSF stated that the downgrade won’t hurt its lending capacity of EUR440 billion.

“EFSF has sufficient means to fulfill its commitments under current and potential future adjustment programs until the (European Stability Mechanism) becomes operational in July 2012,” EFSF Chief Executive Klaus Regling said in a statement.

The fund added that the EFSF’s short-term rating is still at the highest possible level and that the fund is also has the best long-term and short-term credit rating by ratings agencies Moody’s and Fitch.

In its statement today, S&P said the outlook on EFSF is “developing,” meaning it could reinstate the triple-A rating if it sees additional credit enhancements, but it could also further decrease the rating if need be.

Related articles

• S&P downgrades EU’s bailout fund (bbc.co.uk)
• S&P Downgrades EFSF From AAA To AA+, May Cut More If Sovereign Downgrades Continue (zerohedge.com)
• Market Extra: S&P downgrades anticipated, but still stir turmoil (marketwatch.com)