Is France About to be Downgraded?

Rumors are circulating that S&P is planning a widespread downgrade of Eurozone economies in a move that could shake up European economies and spook global markets as a whole.

According to unnamed EU sources cited by Dow Jones, S&P could be planning to downgrade "multiple" Eurozone economies today. The euro has fallen below $1.27 on the news.

Sources are expecting France to be targeted, with a downgrade that could come today. French officials have denied receiving a 12-hour notice from S&P of a coming downgrade, but denials have not stopped euro markets to continue falling.

Currently, France is one of the few Eurozone economies to keep its AAA rating. The CAC 40 fell steeply on the news, eliminating morning and early-afternoon gains due to the successful sale of €4.75 billion ($6.1 billion) of Italian bonds.

The rumor comes after buoyant results in Italian and Spanish bond sales, in which two of the largest PIIGS members were able to sell off as much debt as they had hoped for, thanks both to increased ECB intervention and fallen worries about a Eurozone default or break in the euro. While France has been targeted as a likely victim of an S&P downgrade, rumors of widespread Eurozone downgrades suggest that the rating agency is concerned about a more pernicious level of economic weakness.

While much attention in the media has been placed on German banks and their role in the Greek bond market, French banks were the biggest lender to the Mediterranean country, with around $50 billion invested in private and public ventures in the country. French banks are also substantially invested in Italian and Spanish markets.

The three largest French banks--Société Générale (EPA: GLE), BNP Paribas (EPA: BNP) and Crédit Agricole (EPA: ACA) were downgraded by Moody's in early December. All three banks are still higher in intraday trading.

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