France credit rating downgraded

mar bonnin palmer

France’s credit rating has been downgraded by credit rating agency Standard and Poor’s (S&P).

S&P claims that France and several other downgraded economies are not sufficiently equipped to fight the debt crisis. France has been stripped of its top AAA rating to just AA+.

S&P has also downgraded Italy, Spain, Cyprus and Portugal by two notches, claiming that Europe as a collective does not have the budget discipline to address the debt problem.

Other ratings agencies, Moody’s and Fitch, have kept France on their AAA rating.

These credit ratings for banks and investors allow them to decide how much to lend particular borrowers, based on their credit worthiness.

AAA is considered the safest rating. Those graded BBB- or higher are considered investment grade and those below are considered junk grades.

Fidelity Chief Investment Officer for equities, Dominic Ross, commented on the new rating; “While the downgrades to France may not be too surprising to markets, it is still disappointing news that will drag down the euro and equity markets.”

“The eurozone crisis is now dominating market activity again, after a period in which better economic news from the US, and easier monetary policy in China had helped markets move higher.”

French Prime minister Francois Fillion believes that the reason behind the downgrade is the country’s exposure to the Euro-zone crisis, yet the decision was not entirely unexpected.

Whilst parts of Europe have been downgraded significantly so that they are considered ‘junk’, others remain fairly stable in the ratings table. Germany , Finland and the Netherlands ratings remained unchanged at AAA, for example.

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