S&P to downgrade France and Austria

The word is that France will be downgraded by Standard and Poor’s tonight. AFP is reporting that French officials expect France to drop to a AA+ rating, losing its treasured AAA status and increasing how much it will have to pay to borrow money.

2012 has, so far, been relatively quiet on the euro front. But expect the issue to return to centre stage over the coming weeks. There are the downgrades coming tonight – France is apparently not the only eurozone country that S&P will mark down with Austria set to lose its AAA rating too – and a coercive and chaotic Greek default seems increasingly likely. Add to this the Sarkozy-Merkel meeting next week and then the European Council at the end of the month and you can see how the never-ending crisis will once again dominate the news.

In Britain, expect the coalition to point out how this downgrade highlights the importance of a credible deficit reduction plan.