Standard & Poor''''s on Friday reiterated the AAA rating of the European Financial Stability Facility, the emergency fund slated to be greatly expanded under this week''''s eurozone crisis deal. S&P said the EFSF''''s "integral" link with EU governments and the guarantees they offer it were key to maintaining its top-flight rating and stable outlook, despite Thursday''''s decision to quadruple the fund''''s market power to one trillion euros ($1.4 trillion).
S&P pointed to the decision by EU leaders Thursday to leverage EFSF resources through investments, including in special purpose vehicles (SPVs), which will be used to finance and provide risk insurance to financially weak eurozone countries.
"We do not expect this will affect the ratings on the EFSF as long as EFSF''''s liability is limited to its equity-at-risk and not associated with the assets and operations of the SPVs," S&P said. "However, if EFSF-funded financial support programs do not improve market confidence in the eurozone, and contagion puts ''''AAA'''' rated members'''' ratings under pressure, this could indirectly affect EFSF''''s creditworthiness," S&P added.
S&P said assigning a stable outlook reflects the "almost certain" likelihood that EU governments would back the EFSF "in the event of financial distress." The EFSF is expected to end active financing operations in mid-2013 to be replaced by a new entity.
Comments
Comments are closed for this article.