Investors have been expecting Standard & Poor's to downgrade large parts of the eurozone for some time. The American ratings agency made its negative outlook known well before the last EU summit.

But with negotiations for a new fiscal pact currently underway, Friday's decision was a tough blow. The analysts say it's all "too little, too late" - even though eurozone leaders have clearly hit turbo during this round. Austerity packages and reforms are on track, and there is little more the eurozone can do right now. It will take years before over-indebtedness is brought under control.

The fact that prospects for the eurozone economy are grim is old news to investors - and no reason for renewed panic. The markets and a number of the banks have been in a state of panic for months. They can't get any more panicked.

The question now is whether this latest downgrade - from one of the three biggest ratings agencies - will force interest rates on sovereign debt to rise.

Standard & Poor's removed America's AAA rating in August, but interest rates have failed to rise there.

But the French downgrade could cause problems for the eurozone rescue fund. The rescue fund could lose its AAA status because its stakeholders have lost theirs. The only country that could balance that is Germany, as it has managed to hold on to its top rating.

Germany would have to absorb higher guarantees to win confidence among the fund's investors. It would be a stress test for the coalition government in Berlin, where German Chancellor Angela Merkel has agreed not to increase the country's debt exposure.

Stay calm

French President Nicolas Sarkozy, meanwhile, has a serious problem on his hands.

In April, when France goes to the polls, Sarkozy will seek a new term. But his survival as president in the past year has largely been tied to his ability to retain La Grande Nation's AAA rating. All such talk is over now.

Paris and Berlin are playing down the situation and rejecting any talk of new austerity packages for France. In any case, said German Finance Minister Wolfgang Schäuble, the markets have known how bad things are - meaning, stay calm! And he is right. Intensifying the crisis with hysteria will do no good.

But some are likely to fire a few shots at the ratings agencies - those messengers of bad news.

The other option is to simply ignore the ratings agencies. It's what US President Barack Obama did in August and it was very popular. Proud USA will always be a AAA rated country, or so went the line.

Europe should display the same sort of confidence.

The end of AAA

There are only four countries left in the eurozone that still have a AAA rating. Worldwide, the number is not much higher.

If all countries are downgraded, ratings across the board will have to be relativized. After all, investors have to put their money somewhere to make returns on interest payments. So it's possible that in the future AA+ (one notch below the top mark AAA) will become the highest rating.

At the same time, it's significant that Austria - a country traditionally considered stable - has also lost its top rating. The banks are to blame there. They are highly engaged in Eastern Europe and are over-indebted. It means Austria could now collapse if a country like Hungary were to go bankrupt.

But there is another piece of news that poses an even greater threat than this ratings ritual: the fact that negotiations over a voluntary debt cut between the banks and Greece have failed for now.

This could endanger Greece's fragile rescue plans, driving the country, where the crisis began, ever closer to a disorderly bankruptcy by March. Leaving the eurozone could be its one way out.

Author: Bernd Riegert / za
Editor: Martin Kuebler