In an move expected by commentators, ratings agency Standard and Poor's have downgraded the European Financial Stability Facility (EFSF) rating from top-notch triple A to AA+. Standard and Poor's had the EFSF – used to provide bailout funds in the eurozone – on credit watch negative and had promised to resolve questions over its rating promptly. After last weeks downgrades of sovereign debt across the eurozone, there has been high expectation of an EFSF rating downgrade.

John Chambers, Chairman of the Sovereign Debt Committee at Standard and Poor's  all but said on US news service CNBC the bailout fund's rating would be cut. He pointed out the reliance of the EFSF's triple A rating on the ratings of guarantor eurozone states and said the lending program would have to be scaled back, the guarantees of remaining triple A states increased or buffers introduced to keep its top notch rating. This sentiment was echoed in a Standard and Poor's statement after the rating cut: "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."

Politicians had already begun to play down the importance of EFSF's triple A rating. Before the rating cut was announced, German Chancellor Angela Merkel said that she never saw the top notch rating as vital for the fund. France's Finance Minister Francois Baroin seconded Merkel's remarks after the downgrade, saying action to strengthen the fund's creditworthiness was unnecessary.

Liam Lever, liam@romania-insider.com

(photo source: Photoxpress.com)