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Fitch cuts European Financial Stability Facility to AA+

European Union
Adam Jeffery | CNBC

Fitch Ratings has cut its credit grade for the European fund that provides rescue loans to Greece, Ireland and Portugal.

The agency said Monday it lowered the rating for the European Financial Stability Facility (EFSF) by one notch from AAA to AA+ as a result of its downgrade of France last week. The EFSF's creditworthiness depends on that of the countries that provide its financing, which includes France.

"Following the downgrade of France's IDR (issuer default rating), the EFSF's long-term debt issues are not fully covered by 'AAA' guarantees and over-guarantees and, for debt issued before October 2011, by the cash reserve," Fitch said in a statement.

Monday's downgrade of the EFSF means the fund could have to pay higher interest rates to raise money. Fitch's rivals Standard & Poor's and Moody's have already downgraded it.

The EFSF has been taken over by a new, permanent bailout fund, the European Stability Mechanism. However, it still manages the rescue loans to Greece, Ireland and Portugal.

France's downgrade to AA+ from AAA on Friday was because of budgetary and economic concerns amid the euro zone's ongoing sovereign debt crisis, Fitch said.

"Fitch assumes there will be progress in deepening fiscal and financial integration at the euro zone level in line with commitments by euro area policymakers," the statement said.

—By The Associated Press and Reuters.

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