US rating agency Standard & Poor's cut its credit rating of the euro zone's EFSF rescue fund yesterday, even as pressure on Greece to break a deadlock in debt swap talks if it was to avoid an unruly default mounted.
According to French finance minister Francois Baroin, there was no need to shore up the European Financial Stability Facility after S&P downgraded it by one notch to AA+ from triple-A. His remarks ran on similar lines as the sentiment in Germany, the only major euro zone member to have managed to retain a top-notch credit rating.
S&P said in a statement the decision was all but inevitable after cuts had been made to the creditworthiness of France and Austria two of the funds guarantors.
"We consider that credit enhancements that would offset what we view as the now-reduced creditworthiness of the EFSF's guarantors and securities backing the EFSF's issues are currently not in place," the agency said in a statement.
"We have therefore lowered to AA+ the issuer credit rating of the EFSF, as well as the issue ratings on its long-term debt securities."
There was however no reaction in the financial markets which were reeling on mass downgrades of euro zone members on Friday (See: S&P downgrades ratings of France, 8 other euro zone nations). This was not unexpected and according to Japan, a major buyer of EFSF bonds, they remained an "attractive" investment.