Are credit rating agencies doing more harm than good? That’s the question in the air tonight after S&P downgraded Austria, France, Malta, Solvenia, Slovakia by one notch each, and Cyprus, Italy, Portugal and Spain by two. The decision means that the eurozone crisis, already a serious problem for the continent, will now be more difficult to fix than ever.
S&P also warned that austerity measures alone will not solve the eurozone’s crisis. Some economists are now fairly confidently predicting that 2012 could be the year in which the US economy finally rallies while the eurozone falls further into the mire. S&P’s move leaves only Germany, Finland, the Netherlands and Luxumberg in the eurozone with triple-A ratings.
The downgrade for France could have serious political ramifications for French president Nicolas Sarkozy, who faces a re-election battle in the spring. He was already facing a significant challenge, and now has to work harder than ever to persuade the French people that he has control of the country’s financial problems.