S&P Strips France of Triple A Rating, Spares Germany - Report

A sign displays the name of Standard & Poor`s financial rating services in its offices in Paris, France, 08 December 2011. EPA/BGNES

Global rating agency Standard & Poor's has decided to downgrade France's top-notch credit rating but will spare Germany, Belgium, Luxembourg and the Netherlands, an EU government source said on Friday.

"France loses its triple-A rating," the source said on condition of anonymity, as cited by The Economic Times.

France was along with Germany, Luxembourg and the Netherlands among the six eurozone nations with a AAA rating. The source was unable to say what S&P decided to do with the two others, Austria and Finland.

Belgium has an AA rating, which is two notches below the top score. Another source confirmed "several" countries would be hit.

"Remain alert tonight when US markets close," said another euro zone source.

In December, S&P placed the ratings of 15 euro zone countries on credit watch negative, including those of top-rated Germany and France, the region's two biggest economies, and said "systemic stresses" were building up as credit conditions tighten in the 17-nation bloc.

Since then, the European Central Bank has flooded the banking system with cheap three-year money to avert a credit crunch. At the time, S&P said it could also downgrade the euro zone's current bailout fund, the EFSF.

The ratings agency said that if a downgrade did materialize, countries such as Germany, Austria, Belgium, Finland, the Netherlands and Luxembourg would likely see ratings cuts of only one notch. The other nine countries, most notably triple A-rated France, could suffer downgrades of up to two notches.

S&P declined to comment on Friday on the report of an impending wave of downgrades, which hit stocks, the euro and boosted demand for safe-haven US government debt.

A downgrade could automatically require some investment funds to sell bonds of affected states, making those countries' borrowing costs rise still further.

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