The downgrade robs France of its prized AAA rating, despite vows by the French government to defend its pristine standing through recent measures to cut spending and raise taxes.
According to European economists, France‘s President Nicolas Sarkozy’s failure to win that battle could bode ill for the entire 17-nation euro zone, as well as for his own chances in an upcoming election.
The downgrades will likely increase costs in debt for the affected governments as they try to raise hundreds of billions of dollars on international bond markets this year. France alone needs to borrow about $240 billion to finance its existing debts and annual deficit. Italy and Spain, two large nations that are facing escalating debt problems, were also among the countries downgraded.
The S&P actions could also undermine the effectiveness of the region’s bailout fund, which European leaders have been counting on to help ailing countries such as Greece and stem the crisis from spreading onward to Italy and Spain.
The bailout fund’s AAA rating, and its ability to raise money cheaply, depends in part on the credit standing of France, the euro zone’s second largest economy. However, with France out, Germany may be the only left to support for what remains of the European economy.
(아주경제 앤드류 이 기자)
reporter
Park Sae-jin
swatchsjp@ajunews.com