Ratings agency S&P acted on its threats to fifteen eurozone countries about the safety of their credit ratings by stripping France and Austria's triple-A status today. Italy and Spain were pulled down to BBB+ and AA-, respectively, while Portugal, Cyprus, Malta, Slovakia and Slovenia were also downgraded. Germany, the Netherlands, and Luxembourg are safe for now, but the cuts will likely complicate Europe's ongoing debt crisis, including the bailouts planned for Greece, Ireland, and Portugal. "A French downgrade may prompt investors to demand higher rates on the fund’s debt," Bloomberg reports. Upon news of the downgrades, global markets sank on Friday and the euro hit a seventeen-month low.
The Dow Jones industrial average dropped 0.7 percent, while the Standard & Poor's 500 index also fell 0.7 percent. Markets in France, Britain, and Germany all closed down as well.
"If rating companies pull it, we’ll face the situation coolly and calmly," said French president Nicolas Sarkozy last month. "It would be an additional difficulty but it’s not insurmountable. What is important is the credibility of our economic policy and our strategy of reducing spending." Sarkozy faces additional danger personally because he is running for reelection in the spring, amid indications that France is entering a recession.
The other major ratings agencies, Moody's Investor Service and Fitch Ratings, have also put the European Union countries on watch, urging leaders to come up with "decisive policy measures" to end the debt crisis.