Eurozone’s ‘big bazooka’ 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.
By Louise Armitstead
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, Mario Monti, the Italian prime minister, pleaded for Germany and other creditor countries to help lower his country’s borrowing costs. He warned there would be a “powerful backlash” among voters in smaller EU countries if they did not.
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″.