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Rehn slams 'inconsistent' credit rating downgrade

The European Commissioner for Economic and Monetary affairs has strongly criticised yesterday’s decision by Standard & Poor’s, saying that member states had been taking “decisive action in all fronts” to stem the debt crisis.

Image: Anthony Devlin/PA Wire/Press Association Images

THE EUROPEAN COMMISSIONER for Economic and Monetary affairs Olli Rehn has condemned yesterday’s decision of US-based credit rating agency Standard & Poor’s to downgrade nine eurozone countries.

On Friday evening, S&P revealed it was cutting the credit rating of France – as well as Austria, Malta, Slovakia and Slovenia – by one notch, and the ratings of four other countries – including Italy, Spain, Portugal and Cyprus – by two notches. The downgrade stripped France and Austria of their coveted AAA ratings, and reduced Portugal to junk status.

Rehn has strongly criticised the move, saying: “I regret the inconsistent decision earlier today by Standard and Poor’s concerning the rating of several euro area member states, at a time when the euro area is taken decisive action in all fronts of its crisis response.”

There had been weeks speculation ahead of yesterday’s announcement that France may lose its top-tier AAA rating, as last month S&P put 15 countries, including Germany and France, on notice that they faced potential downgrades.

The advance notice means the downgrades likely won’t panic financial markets and drive up European governments’ borrowing costs much higher than they already are, reports the AP. ”People knew it was coming, and it was only one rating agency,” said Marc Chandler, head of global currency strategy at Brown Brothers Harriman.

Today, the French Prime Minister Francois Fillon said that his country would push ahead with the implementation of cost-cutting measures in response to the downgrade. He said the downgrade confirmed his conservative government’s plans for more reforms to bring down debts, despite worries that more austerity measures could suffocate growth.

Fillon said the government wouldn’t adjust the budget yet, saying it had been devised with an assumption of higher borrowing costs.

Meanwhile, the head of the bank of Austria has described S&P’s move as”clearly political”, reports EurActiv.com.

Moody’s and Fitch Ratings have yet to follow S&P.

Additional reporting by the AP

Read: S&P runs riot in the eurozone: France loses AAA rating as Portugal turns to junk>

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