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S&P downgrades France, spares Germany

Standard & Poor’s has decided to downgrade France’s top credit rating by one notch but will spare Germany, Belgium, Luxembourg and the Netherlands, EU government sources told AFP on Friday.

business Updated: Jan 14, 2012 09:29 IST

Standard & Poor’s has decided to downgrade France’s top credit rating by one notch but will spare Germany, Belgium, Luxembourg and the Netherlands, EU government sources told AFP on Friday.

“France loses its triple-A rating,” one source said on condition of anonymity, adding that the credit ratings agency, one of the world’s top three, has notified the governments of its decision.

“The Standard & Poor’s downgrade is by one notch,” to AA+, another source told AFP.

France was along with Germany, Luxembourg and the Netherlands among the six eurozone nations with a AAA rating. Sources were 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.

S&P warned last month that the credit ratings of 15 of the eurozone’s 17 member states were at risk of a downgrade due to the ongoing debt crisis.

Meanwhile, the euro hit its lowest mark in over a year on Friday on fears of a widespread European downgrade, in a sour end to what had been one of Europe’s brightest weeks since the debt crisis intensified.

Earlier on Friday markets across Europe fell in afternoon trading on reports that rating agency Standard & Poor’s was poised to downgrade the debt of several countries in the eurozone and talks in Athens between the Greek government and private investors failed to reach agreement on a crucial debt swap.

In late afternoon trading in Europe, the single currency hit a 17-month low of $1.27 on concerns about the downgrade.

The credit downgrade would escalate the threats to Europe’s fragile financial system. It could drive up the cost of European government debt as investors demand more compensation for holding bonds deemed to be riskier than they had been. Higher borrowing costs would put more financial pressure on countries already contending with heavy debt burdens.