Europe Hammered By S&P Downgrades - Greek Debt Talks Collapse

Friday the 13th was not a good day for Europe.

In the midst of the European trading day, news began circulating that credit agency Standard and Poor's would downgrade many eurozone countries, including France, Italy and Spain. Given Europe's deepening financial problems, that move had been widely expected.

What traders and investors did not expect was for talks to break down between Greek officials and bondholders over how to avoid a looming default.

"While we're all focusing the S&P cuts, we could come back next week and find out that Greece is about to go right over the edge," said Art Cashin, head of trading for UBS at the New York Stock Exchange.

After talks with creditor banks broke down, Greeks officials warned of "catastrophic" results if a deal to swap bonds is not reached soon. After more than three months of negotiations, the parties remain badly divided over how much Greece will end up paying and how big a hit the banks will take.

S&P, which took away the cherished AAA rating from U.S. government securities in August, took the same step with France Friday, cutting the rating one notch to AA+.

“This is not a catastrophe. It’s an excellent rating. But it’s not good news,” Finance Minister Francois Baroin told France 2 television, saying the government would not respond with further austerity measures.

S&P also downgraded eight other countries, including Austria and Slovakia by one notch and Italy, Spain and Portugal by two notches. Cyprus, Malta and Slovenia were also downgraded. S&P gave a negative outlook to 14 eurozone countries, meaning there is a one-in-three chance they could be downgrded again in 2012 or 2013. Only Germany and Slovakia were given "stable" outlooks.

Read the rest here.