A shot across the bow of the EFSF hitting the wires this afternoon.
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Rating agency Standard & Poor's said Monday it has downgraded the creditworthiness of the euro zone's rescue fund by one notch to AA+, putting the fund's ability to raise cheap bailout money at risk.
"The downgrade to 'AA+' by only one credit agency will not reduce (the) EFSF's lending capacity of 440 billion euros," Klaus Regling, the fund's chief executive officer, said in a statement. S&P had warned in December that it would cut the rating of the 440 billion-euro EFSF in line with the downgrades of any triple-A country.
Moody's and Fitch, the other big two rating agencies, still have the EFSF at triple-A, meaning that it would count as a top-notch investment for most funds. But analysts warn that further downgrades are likely soon.
Once another big agency cuts the EFSF's rating, the euro zone faces a stark choice. Either the fund starts issuing lower-rated bonds — and accepts higher borrowing costs — or its remaining triple-A contributors increase their guarantees.
So far, Germany, the biggest of the four triple-A economies in the euro zone, has ruled out boosting its commitments to the fund, and increases also appear politically difficult in the Netherlands and Finland.