Euro plunges on France rating fears

The euro has plunged against the dollar, amid rumours that the credit-ratings agency Standard & Poor's is poised to downgrade several eurozone countries later today, including France. The euro declined sharply against the dollar, to below $1.27, as the reports swirled around Europe's financial markets. The move, which was first signalled by S&P before Christmas, could plunge financial markets into fresh turmoil, just as a relatively successful bond auction by Italy this morning had raised hopes that the worst of the sovereign debt crisis was over. The loss for France of its treasured AAA status would be a blow to the economic credibility of Nicolas Sarkozy, who must stand for re-election later this year. Reuters quoted a "senior eurozone source" as saying that several countries were about to be downgraded. France's public finances are viewed as vulnerable if Europe has to bail out more eurozone members in the coming months, perhaps including Italy or Spain. Governments have to be given advance warning by ratings agencies of any sovereign rating downgrade. The tension around financial markets was exacerbated by news that talks between the Greek government and its private-sector bondholders had been halted until next week. Persuading banks and hedge funds holding Greek bonds to accept a loss is a key part of the bailout deal that Athens requires to avoid plunging into bankruptcy. Europe's leaders are due to meet at the end of this month to hammer out the next moves. The Greek finance minister, Evangelos Venizelos, said: "We will most likely resume talks next Wednesday. We must process more issues."