(Image Source: Wikimedia)

 
BY WEN YAN
 
ANCHOR CHRISTINA HARTMAN

Credit Rating Agency Standard and Poor’s put 15 European countries on negative credit watch. That includes EU’s bellwether Germany, whose perfect rating has, up to this point, never been questioned.

The Wall Street Journal has more.

Michael Casey: “It basically means there’s a possibility of downgrade. That’s what the signal is here. Historically, one out of the two chance of 50% chance that once they conclude their review which is within 90 days, they will downgrade these countries’ ratings. The significant thing about this is six of these countries have triple A rates.”

S&P made the announcement just hours after Germany and France reached an agreement on tighter budget surveillance. Financial Times says S&P’s timing is confusing.

“The agency is acting as euro zone governments make further progress towards a comprehensive deal to contain the region’s sovereign debt crisis ahead of a crucial EU summit on December 9 … S&P’s move at such a sensitive stage is likely to exacerbate the crisis.”

Despite concerns from European governments, S&P says it believes the systematic stress’ has risen to the extent that it will affect eurozone as a whole.

So -- that happened late Monday. Then on Tuesday -- the agency put the bailout fund known as the EFSF on negative watch. But as the London Evening Standard’s Joe Murphy suggests, it wasn’t too much of a surprise.

“European Commission officials admitted that there were already doubts about whether the EFSF could carry enough market confidence before today's announcement. Under the original plan it would be turned into a fire-fighting fund worth one a trillion euros.”

According to the AP -- if the fund loses its top rating -- it could mean funding bailouts could end up costing a lot more.  S&P also downgraded the U.S. from its list of top-rated countries this summer. And politicians have complained about the behavior of rating agencies during crises.

An analyst tells Bloomberg, the S&P’s unprecedented recent moves will create a ripple effect.

Mark Grant: “You have to think through the ramification of this which is every bank now in Europe is also going to be downgraded as the solvency is downgraded.  Many corporations in Europe will be downgraded. Euro is going to come under tremendous pressure worldwide.”
 
But the New York Times says S&P’s warning could positively influence European leaders’ actions.
 
“Few now dispute the central thrust of the argument advanced by the rating agency that the economy of the euro zone is deteriorating so fast that quick and far-reaching action is required to avert disaster.”

Greece isn’t among the 15 countries, since its rating is already at near-junk status.

Business News

S&P Threatens to Downgrade 15 Euro Nations

December 6, 2011
(2:30)
Credit Rating Agency S&P announced on Monday it will put 15 eurozone nations in review for a possible downgrade, including six AAA countries.
   
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