Euro Rescue Fund Will Have to Be Modified: S&P


The credit ratings downgrade by Standard and Poor's of nine euro zone countries, including France and Italy, will likely lead to changes to the European Financial Stability Facility (EFSF), the Chairman of the sovereign debt committee at Standard and Poor's told CNBC on Monday.

"(The EFSF's credit rating) rests on the guarantees of its member states, including the Triple-As, so either the vehicle will have to have its lending program scaled back or the guarantees of the remaining Triple-A members will have to be increased or cash buffers will have to be introduced," John Chambers said.

Standard and Poor's put the long-term Triple-A rating on the EFSF on credit watch negative on December 6th, pending a 90-day review period before a final decision is made in early March. But Chambers said that if history is any guide, a decision could come within 45 days, suggesting the organization could make an announcement as early as the end of this week. Euro zone finance ministers said in a statement released on Friday that they would do all they could to ensure the rescue fund keeps its top rating.

Chambers also defended what he described as a “timely” move, in response to widespread criticism by European politicians and economic heads over the timing of downgrade.

"Our role is to give timely information to investors and if you give them timely information, if you give it to them in modest increments, then we think that they can make their own judgments about how they are going to allocate their portfolios," Chambers said.

"Obviously, it's more useful to have that information in the market before the very high refinancing requirements in the first-quarter, than after,” he added referring to the key European bond sales taking place in the current quarter.