UPDATE; THE FRENCH GOVERNMENT HAS ACKNOWLEDGED THAT STANDARD & POOR'S HAS DOWNGRADED THE COUNTRY'S CREDIT RATING ONE NOTCH FROM AAA TO AA+.
"It's not good news, but it's not a catastrophe," said French Finance Minister Francois Baroin. "It's not ratings agencies that decide French policy."
The day - and the week - ends with rumors swirling that Standard & Poor's is preparing to issue credit downgrades for a number of euro zone countries including France. How strong are the rumors? If S & P doesn't drop France a notch or two from AAA every newspaper and most of the financial community in Europe is going to feel real embarrassed.
The rumor has sent stock markets down. The euro has lost more than a cent against the dollar.
The potential for creating renewed difficulties just as the euro zone crisis had been calming down is enormous. France is a big contributor to the European Financial Stability Fund, as is Austria, another euro zone AAA country.
The Guardianreminds readers of a statement S & P made last October about the EFSF and its funders. "In general, we expect the outlook on EFSF's issuer credit to reflect the outlook on the sovereign rating of its weakest 'AAA' guarantors."
That would mean any borrowing by the EFSF to help fund bail-outs of Ireland, Portugal and Greece would have to be downgraded as well.
In any case, it may seem like a bad day to have posted a long essay about the euro zone crisis having passed through the crisis and entered a new calmer phase, but for the moment I will stick by the points I make in the piece.
The social and political aspects of the crisis are just as important as the purely economic ones. So long as the main political leaders are working together then a ratings agency downgrade is not going to have a great effect on ultimately finding a solution to the crisis.
Besides, the rumor that France is going to lose its AAA rating has been around for months. If and when it finally happens - tonight, next week or never - the French are prepared and the extra points of interest they will have to pay in the future will not seem so frightening.