An hour and a half after the original message was sent out, S&P sent out a clarification that the message resulted from a technical error and not from any action it intended to take against France.

French policy makers were understandably enraged and called for an investigation of the mistake.

At a time where the Eurozone was already getting very jittery over the problems of Greece and more recently Italy, this was the last thing that the markets needed. A downgrade of France’s AAA credit rating would affect the rating of the European Financial Stability Facility (EFSF), the bailout fund for struggling euro member countries.

Earlier in the year, S&P had downgraded the credit rating of the United States from AAA to AA+. This was followed by the resignation of its president Deven Sharma a few weeks after the downgrade.

To leave your comments, please go to : Confusion Over France Downgrade

Their huge deficits has lead the financial markets to increasingly believe in recent days that one of them might default on its sovereign debt.

Their recently downgraded credit ratings not only makes it more expensive for them to borrow money, and also harder to find lenders.

Devaluation of currency is not an option unless they want to consider leaving the Eurozone. To prevent this from happening, some of the stronger countries might have to step in to bail out the weaker ones. This is provided (of course) that the stronger countries are not in trouble themselves.

Ultimately, governments will find that they cannot spend more then they earn forever. The biggest challenge is knowing when a crisis will erupt as such situations can run for longer than expected.

Dubai was quickly written off as a non-event. How will PIIGS play out?

To leave your comments, please go to : PIIGS Threatens Stability of Eurozone