S&P warns on credit rating of bailout fund

Standard & Poor’s has warned the eurozone’s bailout fund risks losing its AAA-rated status, in a week it already warned 15 eurozone members supporting the rescue portfolio they also risked downgrades.

The ratings agency put the EFSF, created last May, on a negative ratings watch, which means it risks losing its top notch current rating in the short term.

The agency told similarly high grade supporters of the fund this week, such as Germany, France and the Netherlands, they faced a similar fate if their leaders did not act decisively on the bloc’s ongoing debt crisis soon.

Of the bailout fund, S&P warned: “Depending on the outcome of our review of the ratings on EFSF member governments, we could lower the long-term rating on the EFSF by one or two notches, if any.”

The agency expects to resolve EFSF’s CreditWatch placement within 90 days, either way, after completing review of the EFSF guarantor members currently rated AAA.

It said earlier this week it hoped to do this as soon as possible after EU leaders meet on Thursday and Friday in Brussels, to work out another rescue plan for the eurozone and euro.

The €440 billion EFSF was created in May last year to protect indebted eurozone nations, and EU leaders are hoping it can be enlarged to €1trn, although fund raising attempts outside Europe to expand it have so far proved unsuccessful.

 

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