17 JANUARY 2012

Europe's bail-out fund long-term rating was downgraded one notch by Standard and Poor's (S&P) to AA+ yesterday following France's similar fate on Friday , the second largest contributor to the European Financial Stability Facility (EFSF) with € 158.5 billion of total guarantees to the Fund's pool behind Germany‘s € 211.1 billion. Both countries contributions surpass 80% guarantees to EFSF with € 369.6 billion.
President of the  EuroGroup Jean-Claude JUNCKER www.http://europa.eu said the adequacy of the overall lending ceiling of the EFSF/ESM of EUR 500 billion « will be reassessed by March 2012.« 

Following the announcement, the Fund's communication read that it took note of S&P's decision, and Klaus Regling, CEO reaffirmed EFSF's lending capacity of €440 billion stating that « the downgrade to 'AA+' by only one credit agency » will not reduce it. The Fund further specified that S&P « also affirms that the EFSF's short term rating remains unchanged at the highest possible level of A-1+ », and that the Fund « continues to be assigned the best possible long-term and short-term credit rating by Moody's (Aaa) and Fitch (AAA) underlining the solidity of EFSF. Neither rating agency has indicated any rating action for EFSF in the immediate future. »
The Fund was officially set-up, by the 17 Euro area countries, in June 2010 and is incorporated in Luxembourg. 

Equally to yesterday, trading markets www.cnbc.com ignored the supranational's downgrade announcement following stronger than expected GDP data from China, and Spain's successful bonds issuance although it was downgraded by two notches. France's 10-year T-bills stood at 2.96% http://www.aft.gouv.fr, a long-time unseen low and the Euro's exchange rate initiated an upward trend from a record low USD 1.26 to over USD 1.27.

Last December, the Credit Rating Agency (CRA) Fitch had warned of such possible downgrade as « France is the most exposed of the ‘AAA' euro member states to a further intensification of the eurozone sovereign debt crisis«.