The Associated Press reports that nine European nations saw their credit ratings decline, and the corresponding message will raise concerns around the globe.
The cuts, which eliminated France and Austria's triple-A status, deal a heavy blow to the currency union's ability to fight off a worsening debt crisis. In total, S&P cut its ratings on nine eurozone countries.
Earlier on Friday, Greece sent its own statement of economic misery when talks about financing its debt collapsed. Bloomberg adds that the chances of Greece defaulting has increased as a result of Friday's grim news.France and Austria both dropped one notch to AA+. Italy was lowered by two notches to BBB+ from A, and Spain fell to A from AA-. Portugal and Cyprus also dropped two notches. The agency also cut ratings on Malta, Slovakia and Slovenia.
Greek officials and the nation's creditors agreed in October to implement a 50 percent cut in the face value of Greek debt, with a goal of reducing Greece's borrowings to 120 percent of gross domestic product by 2020. More than two months after the accord was announced, the two sides still need to agree on the coupon and maturity of the new bonds to determine losses for investors. The IIF has aimed to implement the swap this month.
CNN's Richard Quest suggests that France's problems -- though important -- pale when Greece is discussed. However, Reuters reminds us that 2012 is a presidential election year in France, and Friday's credit-rating slide is sure to have political ramifications.“The sticking point is actually coming down to what the interest rate would be on the new bond,” Hans Humes, president of Greylock Capital Management LLC and a member of committee negotiating the deal with the government, said in an interview on Bloomberg Television's “InBusiness with Margaret Brennan.” If the talks fail and Greece defaults, “there will be a lot of contagion,” he said. “The ball is in their court. If you want to do something to head off what could be a disorderly process, now's the time.”
Finance Minister Francois Baroin rushed to emergency talks with Sarkozy and other ministers as France was notified of the move and appeared on the evening TV news even before S&P's announcement to try and play down the impact.
He said the conservative government would simply push harder for structural reforms to boost economic growth and jobs.