Standard and Poor's on Monday cut its rating outlook on the EFSF, the eurozone bailout fund, to 'negative', meaning it could be downgraded outright in the future as the eeurozone debt crisis develops "We have concluded that credit enhancements sufficient to offset what we view as the reduced creditworthiness of the European Financial Stability Facility (EFSF) guarantors are not likely to be forthcoming," S&P said.
Last month, S&P cut the EFSF's top rating by one notch to AA+ after it downgraded some of the most highly rated countries in the 17-nation eurozone such as France and Austria which act as guarantors for the fund. At that time, the outlook on the EFSF rating was put at 'developing' as it waited to see what further guarantees would be put up by the eurozone.
"We no longer expect EFSF member states to provide additional credit enhancements," it said Monday, and accordingly changed the outlook. It said that the negative outlook on the EFSF "mirrors the negative outlooks of France and Austria. "Absent additional credit enhancements, we could lower the ratings on the EFSF if we lowered the long-term sovereign credit ratings on any of the EFSF's 'AAA' or 'AA+' rated members (Germany, France, The Netherlands, Austria, Finland or Luxembourg) to below 'AA+," the agency added. S&P caused consternation in the eurozone in January with its rating downgrade for member states and the EFSF but in the event, the markets reacted relatively calmly, with many saying the move had been factored in for some time.
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