PARIS - Standard & Poor’s yesterday stripped France of its sterling credit rating, cut Portugal’s credit to junk status, and downgraded Italy’s debt by two steps in a wide-ranging action revision of European countries caught in the euro crisis.
The actions, which lowered the ratings of nine countries, were the strongest signal yet that Europe’s sovereign debt woes were far from over and would pose fresh political challenges for politicians, including President Nicolas Sarkozy of France, as they try to stabilize the problem on the Continent, now in its third year.
A downgrade by a single ratings agency like S&P could have an immediate, though not devastating, impact on the countries’ ability to borrow money. S&P warned in December that the agency was reviewing the credit ratings of 15 EU countries because of the crisis.
Germany and the Netherlands, which were on the original list, did not receive a downgrade.
Even before the announcement by S&P, Finance Minister Francois Baroin of France confirmed the loss of France’s AAA grade to AA+, but he insisted the country was headed in the right direction and that no ratings agency would dictate the policies of France.
“It’s not good news,’’ he said on France television earlier in the day, but it is “not a catastrophe.’’
In addition to Italy and Portugal, two nations - Spain and Cyprus - had their ratings cut by two notches. Austria, Malta, Slovenia, and Slovakia, along with France, were lowered one grade.