17 Jan 2012

EU bailout fund downgraded by agency

3:21 pm on 17 January 2012

Standard Poor's has downgraded the credit rating of the fund responsible for bailing out indebted European countries.

The agency on Friday downgraded the ratings of nine of the 17 Eurozone nations, including France, Italy and Spain.

Now it has downgraded the European Financial Stability Facility from its rating from AAA to AA+.

The EFSF will retain its lending capacity of €440 billion.

However, commentators say the downgrade could make it more difficult for the fund to raise money.

A permanent fund, the European Stability Mechanism, is due to begin operating in July. It will run in parallel with the EFSF for one year.

The combined capacity of both funds is supposed to be capped at €500 billion, but Germany, the European Central Bank and the European Commission want it to be bigger.