UPDATED Monday: The NZD/EUR rose over a cent over the weekend to 62.70 euro cents this morning. The NZD/USD plummeted to 78.65USc on the news before quickly recovering to over 79USc.
The downgrade came after markets closed, so there may be more impact when European markets open again tonight, Bancorp said.
UPDATED: Ratings agency Standard & Poor's has announced its decision on the ratings of 16 Eurozone countries following a review of the troubled European Union members, saying recent action taken by eurozone leaders may not be enough to address “ongoing systemic stresses in the eurozone”.
S&P has lowered the long-term ratings on Cyprus, Italy, Portugal, and Spain by two notches; lowered the long-term ratings on Austria, France, Malta, Slovakia, and Slovenia, by one notch; and affirmed the long-term ratings on Belgium, Estonia, Finland, Germany, Ireland, Luxembourg, and the Netherlands.
S&P says all ratings have been removed from CreditWatch, where they were placed with negative implications on Dec. 5, 2011 (except for Cyprus, which was first placed on CreditWatch on Aug. 12, 2011).
Further downgrades may be in store for Austria, Belgium, Cyprus, Estonia, Finland, France, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovenia, and Spain with S&P placing them on negative outlooks – suggesting it sees at least a one-in-three chance that the rating will be lowered in 2012 or 2013.
The ratings agency cited five ongoing stresses for the eurozone: (1) tightening credit conditions, (2) an increase in risk premiums for a widening group of eurozone issuers, (3) a simultaneous attempt to delever by governments and households, (4) weakening economic growth prospects, and (5) an open and prolonged dispute among European policymakers over the proper approach to address challenges.
Acknowledging the December 9 EU summit addressed some issues, S&P says the agreements reached there, and subsequent policy statements, has not produced a breakthrough of sufficient size and scope to fully address the eurozone's financial problems.
“In our opinion, the political agreement does not supply sufficient additional resources or operational flexibility to bolster European rescue operations, or extend enough support for those eurozone sovereigns subjected to heightened market pressures. “
S&P says that agreement was predicated on only a partial recognition of the source of the crisis: that the current financial turmoil stems primarily from fiscal profligacy at the periphery of the eurozone.
“ In our view, however, the financial problems facing the eurozone are as much a consequence of rising external imbalances and divergences in competitiveness between the eurozone's core and the so-called "periphery".”
Read S&P’s full release here.
France has confirmed that S&P will cut the country’s AAA credit rating.
While rumours abounded earlier in the week, France’s economy minister Francois Baroin confirmed the pending move overnight.
"This is not a catastrophe. It's an excellent rating. But it's not good news," Reuters reported him telling France 2 television.
The news agency which says S&P, which routinely gives governments 12 hours notice ahead of a downgrade, declined to comment. It had said in early December that it was reviewing the ratings of 15 of the 17 eurozone members.
France,Europe’s second largest economy is now rated one notch lower at AA+ although the other two main ratings agencies have not changed their top grade ratings on France.
S&P is also set to downgrade the credit ratings of several euro zone other countries on Friday, including Austria but not Germany or the Netherlands, in the first blow of the new year for the troubled single currency, Reuters said.
US stocks fell on the news with the Dow Jones industrial average, the Standard & Poor's 500 Index and the Nasdaq Composite Index also losing ground.
Sat, 14 Jan 2012