Standard and Poor's

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Standard and Poor's

European leaders on Saturday reacted to the downgrading of several countries by Standard & Poor’s credit ratings, calling them as “incomprehensible.” France and Austria lost their triple A, being downgraded to AA+. All the countries in the eurozone, except for Germany, were either downgraded or warned that their credit ratings would be re-examined. Cyprus, Italy, Portugal and Spain lost two notches, Malta, Slovakia and Slovenia, one, Belgium, Estonia, Finland, Ireland, the Netherlands had their ratings confirmed but are on “negative watch,” which means they could be downgraded, while Germany is the only eurozone country which kept its rating at AAA.

The Austrian government said it was incomprehensible that one of three American rating agencies decided to downgrade the European countries. The EU market commissioner Michel Barnier was “surprised” on Saturday about the timing of the rating, just as the eurozone bloc was imposing a tough set of budget rules. EU economic affairs Oli Rehn called the rating as “inconsistent.”

S&P’s rival rating agencies Moody and Fitch did not issue similar downgrades for the eurozone countries. S&P’s rating hit the European markets on Friday causing a 16-month low against the dollar of the European currency.

In France, the Socialist candidate to the presidential elections this year was quick to remind the French people that Sarkozy, who seeks reelection, staked his reputation on the promise that the rating credit of the country would not be downgraded. S&P’a appraisal was exploited against the president, as a defeat in his economic policies.

Francois Hollande charged that it was Sarkozy’s economic policies that were defeated by the downgrading, not France.

Standard & Poor’s explained that the EU fiscal pact agreed by most of the 27 European countries last year was not relevant enough to address the financial problems of the area. It did not produce, in the opinion of S&P’s experts, a breakthrough of “sufficient size and scope.”

Brussels responded to the S&P’s saying that the agency failed to take into account the work the government were putting in applying the EU fiscal pact. Commissioner Bernier said that the S&P’s rating was “just an opinion among other,” and that for him it was more important the economic assessment conducted on the situation.

Germany supported on Friday its neighbor country, by saying that France was on the right track. German finance minister said that by making concrete financial rules binding by an agreement, the eurozone would be able to stabilize the public finances of the weaker countries.

On Friday a group of private lenders said that they had failed to reach an agreement to release Greece of its financial burden. The talks on write-down of Greek debts have not produced a “consolidated response” by all parties.

The European leaders are expected to meet on January 30 to fix the details of the pact that aims at making sure that the eurozone is saved and that the common economy is being boosted again.

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