Brussels, 16/07/2013 (Agence Europe) - On Monday 15 July, the Fitch credit rating agency removed the European Financial Stability Fund's top-notch financial rating, downgrading the EFSF from AAA to AA+. The rating actions were prompted by Fitch's downgrade of France's Long-term Issuer Default Ratings (IDRs) to AA+/Stable and the affirmation of its Short-term rating at F1+ on 12 July 2013. “As the EFSF relies on guarantees by its key member states, Fitch's decision to change the EFSF rating after France's downgrade was expected. The EFSF continues to enjoy excellent ratings and investor confidence”, an EFSF spokesman told this newsletter on Tuesday 16 July.
The other two of the Big Three agencies, Moody's and Standard and Poor's, downgraded the EFSF to AA+ in November and January 2012 (see EUROPE 10743 and 10533).
The decision was expected and the market did not react. Since 1 July 2013, the EFSF has not been providing any new aid for struggling countries because the European Stability Mechanism (ESM) has taken over. The EFSF still has €4.9 billion to pay to Portugal, €3.3 billion to Ireland and €14 billion to Greece. It still has bonds in circulation, however, and remains present on the markets for refinancing, hence the importance of its rating.
A similar decision is not feared for the ESM because the eurozone's permanent bailout fund has €48 billion of own capital and lending capacity to be boosted to €80 billion by April 2014. In September and October 2013, the ESM will start to issue long-term bonds. (EL/transl.fl)