S&P downgrades nine eurozone

S&P downgrades 9 eurozone countries including France, Italy.

Rating agency Standard and Poor's (S&P) has lowered the sovereign ratings of nine eurozone countries, including France and Italy, a move that reignited concerns over the fiscal sustainability of the region.

S&P has lowered the sovereign ratings on nine eurozone countries, of which the long-term ratings on Cyprus, Italy, Portugal, and Spain were lowered by two notches.
The sovereign ratings on Austria, France, Malta, Slovakia, and Slovenia, were lowered by one notch.
France's sovereign rating has been downgraded to AA+ the level of US long-term debt, which S&P downgraded in August last year.
Germany was the only country that retained its coveted AAA tag -- the highest investment grade ratings.
"Today's rating actions are primarily driven by our assessment that the policy initiatives that have been taken by European policymakers in recent weeks may be insufficient to fully address ongoing systemic stresses in the eurozone," S&P said in a statement.
Sovereign rating is an indicator of country's credit worthiness.
Meanwhile, French Finance Minister Francois Baroin has reportedly told France-2 Television, that the downgrade of France's AAA sovereign debt rating was not "a catastrophe."
He reiterated that France still had a solid rating.
"The US, the world's largest economy, was downgraded over the summer," Baroin said.
"You have to be relative, you have keep your cool. It's necessary not to frighten the French people about it."
European Economic Affairs Commissioner Olli Rehn also criticised S&P's decision to downgrade nine eurozone nations as "inconsistent".
The downgrades announced after US markets closed on Friday is likely to be a dampener for financial markets as investors are likely to sell euro, eurozone equities and sovereign bonds.
Meanwhile, earlier Friday, the euro had hit its lowest level in more than a year and stock markets in Europe and the US fell.
S&P said the "stresses" in the eurozone include: tightening credit conditions; an increase in risk premiums for a widening group of eurozone issuers; a simultaneous attempt to delever by governments and households; weakening economic growth prospects; and an open and prolonged dispute among European policymakers over the proper approach to address challenges.
The outlooks on all ratings but for two of the 16 eurozone sovereigns are negative, indicating that there is at least a one-in-three chance that the rating will be lowered in 2012 or 2013, S&P added.
"The outcomes from the EU summit on December 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 eurozone's financial problems," S&P said.
The EU summit mulled ways to bolster the sagging economic conditions in the euro area -- a grouping of 17 countries that share the euro currency.
Meanwhile, S&P has affirmed the long-term ratings on Belgium, Estonia, Finland, Germany, Ireland, Luxembourg, and the Netherlands and the outlooks on the long-term ratings on Germany and Slovakia are stable.
In December last year S&P had warned that 15 European nations were at risk for a possible downgrade, citing increased systemic risk in the region.
Tightening credit conditions, disagreements among European policy makers, high levels of government and household indebtedness, were some of the reasons cited by S&P for keeping sovereign ratings on watch in December 2011.
Earlier in August 2011, S&P had downgraded the US government's 'AAA' sovereign credit rating.
The downgrade, S&P said, reflected its opinion that the fiscal consolidation plan which Congress and the administration recently agreed to "falls short of what, in our view, would be necessary to stabilise the government's medium-term debt dynamics."