As expected, Standard & Poor's cut France's credit rating by one notch, meaning that Europe has lost a member of the triple-A club. But while France gets the headline treatment, S&P's moves actually apply to most of Europe: It lowered the long-term ratings on Cyprus, Italy, Portugal and Spain by two notches, and cut the ratings on Austria, Malta, Slovakia and Slovenia by one notch.
S&P left Germany's top-notch rating alone, and the outlook remains stable. It also affirmed ratings on Belgium, Estonia, Finland, Ireland and Luxembourg and the Netherlands.
The cuts might not be done, though. As S&P warned: "The outlooks on the long-term ratings on Austria, Belgium, Cyprus, Estonia, Finland, France, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovenia, and Spain are negative, indicating that we believe that there is at least a one-in-three chance that the rating will be lowered in 2012 or 2013."
No surprise, S&P said that the cuts are due to what it sees as a lack of progress in dealing with the sovereign-debt crisis, suggesting that the policy initiative unveiled so far might be insufficient to addresses systemic stresses.
S&P said: "The outcomes from the EU summit on Dec. 9, 2011, and subsequent statements from policymakers, lead us to believe that the agreement reached has not produced a breakthrough of sufficient size and scope to fully address the euro zone's financial problems. In our opinion, the political agreement does not supply sufficient additional resources or operational flexibility to bolster European rescue operations, or extend enough support for those euro zone sovereigns subjected to heightened market pressures."
