EFSF hit by S&P downgrade warning

The European Financial Stability Facility (EFSF) has been given a downgrade warning by Standard & Poor’s (S&P), after the agency put a negative outlook on the ratings of most eurozone countries.

S&P placed the bailout fund’s AAA rating on “CreditWatch negative” after taking similar action on 15 of the eurozone’s 17 members. This means the agency believes there is 50% chance the rating could be downgraded in the short term.

The long-term credit rating of the EFSF could be cut by one or two notches if the AAA rating of one or more guarantor members were lowered.

“We expect to resolve EFSF’s CreditWatch placement within 90 days and, if possible, sooner, after we complete the review of EFSF guarantor members currently rated AAA,” the agency says.

Last night, S&P said the increase in “systemic stresses” in the eurozone over recent weeks, caused by factors such as tighter credit conditions and disagreements on how to resolve the debt crisis, warrants placing the countries on CreditWatch with negative implications.

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