Moody's downgrades ESM to AA1 from AAA; EFSF to AA1 from AAA (San Francisco) - Moody's Investors Service has downgraded the long-term European Stability Mechanism (ESM) to Aa1 from Aaa and the European Financial Stability Facility (EFSF) to Aa1 from Aaa, Both with negative outlook.

According to official press note, "Moody's decision was driven by the recent downgrade of France to Aa1 from Aaa and the high correlation in credit risk which Moody's believes is present among the ESFS' and ESM's entities' largest financial supporters."

As far as France is the second largest contributor to the ESM and the EFSF, "Moody's view that there is a high correlation in credit risk among the entities' supporters is consistent with the evolution to date of the euro area debt crisis and the close institutional, economic and financial linkages among the major euro area sovereigns."