Nine countries?

Here is a conundrum: if everybody's credit ratings are cut then what do credit ratings signify? Well, we shall soon find out. France, as we know, has had her AAA credit rating cut, as has Austria. This is very bad news for President Sarkozy who has vowed to preserve that cherished AAA and is starting the presidential election campaign by losing it.

The downgrade of France in particularly is evidence of the divergence taking hold between those European countries that still enjoy rock-solid faith on international markets and those whose economic and financial path is more questionable.

As Reuters details:

S&P cut the ratings of Italy, Spain, Portugal and Cyprus by two notches and the standings of France, Austria, Malta, Slovakia and Slovenia by one notch each.

The move puts highly indebted Italy on the same BBB+ level as Kazakhstan and pushes Portugal into junk status. It put 14 euro zone states on negative outlook for a possible further downgrade, including France, Austria, and still triple-A rated Finland, the Netherlands and Luxembourg.

Germany was the only country to emerge totally unscathed with its triple-A rating and a stable outlook.

This may not be the disaster gleefully predicted by many(a disaster, incidentally, that will affect this country) but it is bad news. However, credit rating is really just that: information that needs to be taken into account when a country tries to borrow money. So one has to ask again: when this many countries are losing their rating, will markets go on paying attention or will they simply metaphorically shrug their shoulders?

Let us not forget that the USA lost its AAA rating last August and the world did not collapse.