Standard & Poor's downgraded France's sovereign debt rating to AA+.
The AP says France's finance minister announced the downgrade, which could affect the European Union's bailout fund. France and Germany have been the Eurozone's pillars and their good credit has supported the rescues of countries like Ireland and Greece.
In interview with television channel France 2, the finance minister, François Baroin, tried to downplay the downgrade.
"It's not good news," Baroin said, but he insisted it was "not a catastrophe."
"It is not the ratings agencies that dictate the policy of France," he added.
If you remember S&P downgraded the United States' credit rating in August. The other two major ratings agency kept the country's top-notch rating, which was credited for keeping interest rates for its debt from shooting up.
We'll have more on this story as it develops.
Update at 4:23 p.m. ET. Downgrade 'Long Overdue':
Our Newscast unit just spoke to Peter Morici, an economist and professor of business at the University of Maryland. Morici said this downgrade "was long overdue."
Essentially he said, France has a "systemic risk." With the Euro, the northern countries have flourished, said Morici. In fact, he said if France was valued using its own currency it wouldn't be worth as much. So, now, as the southern European countries face defaulting and the risk of a Eurozone split becomes real, any advantage the Euro gives France is gone.
"[The downgrade] is not the end of the world," said Morici. "But it is an indication that the stability and opportunity for growth promised by the creation of the Euro have not come to fruition."
Update at 4:03 p.m. ET. France's National Politics:
French President Nikolas Sarkozy is facing an election. This downgrade will no doubt have an effect on its politics. The Wall Street Journal's Angelique Chrisafis reports from Paris:
"With less than 100 days until the first round of the French presidential race, the credit-rating downgrade in Paris will seriously complicate Nicolas Sarkozy's already difficult bid for re-election.
"'If France loses its AAA, I'm dead,' Sarkozy told aides in October, according to Le Canard Enchaîné. The president has staked his re-election on convincing France that he is the only person with the guts, strength and character to save it from economic doom. The rating cut will seriously dent his image as the Caped Crusader of the financial world."
Update at 3:11 p.m. ET. Shouldn't 'Overrate The Assessments':
Quoting an interview on German television, The Wall Street Journal reports Germany's Finance Minister Wolfgang Schaeuble tried to minimize the significance of a downgrade saying, "In recent months, we have grown to agree world-wide that we shouldn't overrate the assessments of rating agencies. It's not new that there is a great uncertainty in financial markets regarding the euro zone."
Update at 3:09 p.m. ET. Rating The Same As The U.S.:
It's worth noting that a AA+ rating is the same S&P has assigned to the United States.
Update at 3:05 p.m. ET. 'Like Most Of The Eurozone':
In his interview with France 2, Baroin also said France's rating had been lowered one notch "like most of the eurozone."
The AP points out that there is no confirmation from S&P that any other European country has been downgraded. The Guardian runs through what that may mean:
"Of the 17 members of the eurozone, 15 were warned by S&P last month that they could be downgraded. We've heard strong denials from Germany, Finland, the Netherlands and - in the last few minutes - Ireland.
"That leaves ten on the table — Austria, Belgium, Luxembourg,Estonia, Italy, Malta, Portugal, Slovakia, Slovenia and Spain."
Update at 2:56 p.m. ET. The Markets:
As we've said, this announcement was widely expected, so the markets don't seem to be reacting dramatically. The Dow, Nasdaq and the S&P were down less than 0.75 percent.
The AFP reports on the European markets:
"European markets had expected the downgrade, which was widely reported during the day even if Standard and Poor's were not expected to confirm it until later in the evening, and stocks only slid back slightly.
"But the single currency itself was rocked by the news, which coincided with a breakdown in talks to agree a Greek debt writedown, and the euro slipped to 16-month lows against the dollar."
Update at 2:50 p.m. ET. AA Or AA+?
The AP is reporting that S&P cut the rating to AA, but several other news sources, including the Wall Street Journal, The Guardian and France 24, are reporting it's been cut to AA+. We're going with AA+ for now. But we'll revise if we need to.
Update at 2:35 p.m. ET. Rating Cut 'Isn't A Catastrophe':
The Wall Street Journal, which is running a live blog on the news, reports that François Baroin, France's finance minister, sought to minimize the effect the downgrade may have on the country and the Eurozone.
In an interview with television station France 2, he said ratings "don't dictate French politics."
"Of course we would have preferred to keep our Triple A credit rating," Baroin said.
Update at 2:25 p.m. ET. No Confirmation From S&P:
NPR's Marilyn Geewax reports S&P has not yet confirmed the downgrade, but it is widely expected they will make an announcement at 4 p.m. ET., after the markets close.
This news was not unexpected. In December, Fitch, another of the major credit rating agencies, assigned France's sovereign debt a negative outlook.
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