Patience for Standard & Poor's is wearing thin as it warned it may carry out an unprecedented mass downgrade of Eurozone countries, if EU leaders fail to deliver a convincing financial and political solutions on how to solve the region's debt crisis in a summit on Friday, according to Reuters.
It said ratings could be lowered by one notch for Austria, Belgium, Finland, Germany, the Netherlands and Luxembourg, and by up to two notches for the remaining nine placed under review, including currently AAA-rated France. Cyprus was already on downgrade watch and Greece already a 'junk' CC-rating.
President Nicolas Sarkozy and Chancellor Angela Merkel told reporters that their plan included automatic penalties for states that fail to keep deficits under control, and an early launch of a permanent bailout fund for euro states in distress. Whether this is good enough to resolve the crisis and restore investors’ confidence remains to be seen but any move of advancement are likely to bring cheer to all parties.
As the rating agency was widely criticised for their inertia during the Great Financial Crisis (GFC) in 2008, they would be adamant not to repeat the same mistake again by erring on the side of caution.
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