So that’s it, then. The veil has slipped. The only surprising aspect of the French sovereign debt downgrade is that it took so long. The eurozone’s second-largest economy has lost its AAA rating. Eight other single currency members were also downgraded. Given that Paris is bank-rolling no less than a fifth of the purported “big bazooka” bail-out fund – the so-called European Financial Stability Facility – monetary union is now on very thin ice.

That’s because, in the wake of S&P’s exocet, the EFSF also could be downgraded. So the fund, too would pay more to borrow, just as credit becomes more expensive for the newly-downgraded countries it might need to bail-out. The likelihood the EFSF can do its job will fall, then, as the chances it will be needed rise. The question of whether the fund can “lever-up” from its existing €440bn (public money pledged, not delivered) to the €1,000bn-plus that may be needed if Europe’s banks endure “another Lehman”, is now under serious scrutiny.
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