GO
Loading...

Fitch cuts European Financial Stability Facility to AA+

AP with Reuters
Monday, 15 Jul 2013 | 2:26 PM ET
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.

Europe Still Has a Lot to Do: IMF's Blanchard
Olivier Blanchard, chief economist at the IMF, says that a lot more needs to be done in Europe to improve the state of the banking system.

—By The Associated Press and Reuters.

Featured

Contact Europe News

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    › Learn More

Europe Video

  • Jan Dunning, CEO of St Petersburg-headquartered hypermarket chain Lenta, says the situation in Ukraine has had no impact on the group, as consumer confidence remains unaffected in Russia.

  • Vincent Deluard, European strategist at Ned Davis Research Group, says the strong euro is a problem for the region's companies, especially for the large exporters.

  • European shares closed higher on Thursday as investors brushed aside concerns regarding Ukraine and focused instead on Wall Street earnings and the latest U.S. jobs data.