Fitch warns may downgrade EFSF eurozone bail-out fund

20th December 2011, Comments 0 comments

The Fitch credit rating agency warned on Tuesday that the eurozone's new bail-out fund could lose its triple-A debt status if its main sponsors France and Germany do.

"Fitch Ratings says the 'AAA' rating on debt issues of the European Financial Stability Facility largely depends on France and Germany retaining their 'AAA' status," the company said in a statement.

"The revision of the rating outlook on France to 'negative' last Friday implies that the risk of a downgrade of EFSF debt has increased," it said.

"We affirmed France's 'AAA' status but warned that that there is a slightly greater than 50 percent chance of a downgrade within the next year or two.

"This is therefore also the case for the 'AAA' ratings assigned to the EFSF's debt issues, unless additional credit enhancement mechanisms are introduced," it warned.

The EFSF was set up this year by eurozone members states to act as an emergency fund to cover losses in the case of sovereign debt default, and thus act as a guarantor to ailing eurozone national economies.

Between them, France and Germany provide 80 percent of the funds backing up the EFSF and Fitch noted: "France is the most exposed of the 'AAA' euro member states to a further intensification of the eurozone sovereign debt crisis."

© 2011 AFP

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