Eurozone’s ‘big bazooka’ bail-Out fund is left in tatters by S&P downgrade

Plans for a €1 trillion “big bazooka” to stem the debt crisis were crushed on Monday night as Standard & Poor’s stripped the European Financial Stability Fund (EFSF) of its AAA credit rating.

Eurozone's 'big bazooka' bail-out fund is left in tatters by S&P downgrade

S&P said the EFSF’s rating would be cut again if member states’ creditworthiness eroded further. Photo: RPStudio / Alamy

10:37PM GMT 16 Jan 2012

The EFSF, which is tasked with supporting indebted countries, was itself hobbled as S&P gave it a AA+ rating, reflecting the downgrade of France and eight other eurozone countries on Friday.

As the standoff with Greece’s creditors continued and Italy pleaded for help to reduce the cost of borrowing, S&P said the EFSF’s rating would be cut again if member states’ creditworthiness eroded further.

Leaders appeared to abandon hopes for the EFSF and turned their focus on the European Stability Mechanism (ESM) instead. Herman van Rompuy, co-president of the European Union, said he would assess the size of the ESM “without delay” and ensure it is operational by July.

Klaus Regling, chief executive of the EFSF, said the fund would have “sufficient means to fulfil its commitments under current and potential future adjustment programmes until the ESM becomes operational in July 2012”.

S&P was severely criticised across the eurozone, even before the EFSF decision was announced. Olli Rehn, an EU Commissioner, said ratings agencies are the tools of “American financial capitalism”.

Wolfgang Schauble, Germany’s finance minister, said rating agencies’ influence should be curbed and insisted German guarantees for the EFSF were sufficient. The governor of the Bank of France, Christian Noyer, said S&P’s mass downgrades “constitutes an additional challenge”.

A bigger hurdle was emerging as Greece’s international creditors warned that crucial talks would not resume without “progress” from Athens and the troika, made up of the nternational Monetary Fund (IMF), European Central Bank (ECB) and EU.

Private holders of Greek bonds are thought to have urged Germany and France to use their weight to persuade troika officials to relax their demands.

Charles Dallara, director of the Institute of International Finance (IIF) who is negotiating on behalf of creditors, has argued that bondholders will accept 50pc losses on their debt but not artificially low coupons on new Greek paper. Efforts to reach a deal, which Greece must do to avert default in March, were suspended on Friday.

Frank Vogl, a spokesman for Mr Dallara, said: “Charles has a plan to go back to Athens but that depends on further progress from official parties that can lead to an agreement.”

The euro fell to an 11-year low against the yen and a 17-month low against the dollar. Stockmarkets rose marginally after a successful sale of French Treasury bills but the Paris faces a bigger test at a bond auction on Thursday.

A summit between Germany, France and Italy, scheduled for Friday in Rome, has been postponed until February.

Stresses in the European banking sector were shown by a record €493bn of deposits being parked with the ECB on Friday night. Latest figures showed that the central bank also bought €3.766bn of eurozone bonds last week, up from €1.104bn the previous week.

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About RICK MILLER

Hello, my name is Rick Miller, welcome to comprehensive photography. In the name 'comprehensive', means to have a pretty solid grasp about the art of contemporary photography, and how the tools (both hardware and software) are all used together to produce a very precious product to meet your needs. Photography simply means that we are able to capture an image through the use of light and film, or, by using digital chips in very sophisticated cameras. My guess is that you "GOOGLED" something about photography to find us here on this website (don't you love Goggle?). I live in Santa Rosa and Eureka, California, about 40 miles (Eureka is a bit further north) north of the golden gate bridge with my wife Pat and our two boys — Ben, and Jeremy. My daughter, Sarah, is grown and lives in Portland Oregon. I am strictly a digital photographer, although I have purchased thousands of rolls of Fugi ASA 400 (now called ISO, the digital cameras auto-correction, for light compensation). Our negatives are all digitized and burned onto a DVD. I've been shooting digital for over five years, with my previous 28 working for AT&T (in digital transport via fiber, DS1, and DS3) — during which time I was a manager in charge of 911, and all "First Responder" communications, for 5 years. I shoot mostly with Canon products — my two camera bodies, and all my lenses are Canon. I edit in a variety of software. Adobe Lightroom and I use Apple's "Aperture" (I'm a Mac person), "Light Room" and "Adobe CS4 Extended". These are tough economic times, anyone out of work and financial issues knows what I mean. I also know how important it is to document special times in our personal lives, without costing a lot. I love working with you, and creating a quality product that will best capture those special moments in time forever. So don't let these tough times stop you from documenting YOUR special times, let's get together and make memories. Have you ever been feeling a little low and maybe started thinking of someone special, and then gone to a photo album or watched a slide show and re-filled your heart with joy? It is truly worth it. This website is growing very fast, it is meant for business but it is also meant for fun (Thank You Rod Remelin). Please feel free to shoot me an E-Mail, and tell me what you like, hate or feel indifferent about. Thank You for being here Sincerely Rick Miller

Posted on January 16, 2012, in POLITICS, US ECONOMY, WORLD ECONOMY. Bookmark the permalink. Leave a comment.

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