Down a notch

The European Financial Stability Facility (EFSF) lost its AAA status with the credit agency Standard & Poor's on Monday, being downgraded by one notch to AA+.

The decision follows downgrades from AAA for France and Austria, which served as top-level guarantors of the bailout fund.

"The EFSF's obligations are no longer fully supported," said the New York-based agency in a statement.

However, the agency said it would reconsider the downgrade provided that certain assurances were made.

“We could raise the EFSF's long-term rating to 'AAA' if we see that additional credit enhancements are put in place," said S&P.

The fund, established in May, 2010, has 250 billion euros of capacity remaining following bailouts of Ireland and Portugal.

Some Eurozone countries have already been looking to boost the EFSF, regarded as insufficient if either Spain or Italy needs help. However, Germany has so far refused to increase its contribution.

Agency's significance downplayed

The S&P announcement came as European Central Bank chief Mario Draghi on Monday downplayed the importance of ratings agencies.

"I think what we should do is to learn to live either without them or with them but to a much more limited way than we do today," said Draghi, saying that markets had reckoned in advance with the downgrades of nine eurozone countries on Friday.

"To a great extent, markets anticipated these ratings changes and priced their assets as if these ratings had already been issued," said Draghi.

However, Draghi added that eurozone leaders still needed to take decisive action, describing the situation inside the eurozone as now "very grave."

"We must not shy away from this fact," Draghi told a European Parliament committee in Strasbourg.

Author: Richard Connor: (AFP, dpa)
Editor: Michael Lawton