Eurozone rescue fund faces loss of AAA rating Analysis by RBS concluded it was "highly unlikely" that eurozone leaders would be willing to inject more funds "solely to defend AAA ratings of the existing EFSF bonds." A downgrade of the EFSF could increase its borrowing costs, meaning it would have to pay higher yields on the bonds it issues to finance bail-outs, and the chances of leveraging it would be slim. Jean-Claude Juncker, the Prime Minister of Luxembourg, one of the other remaining AAA-rated eurozone countries, said yesterday that the EFSF's sharehol­ders affirmed "their determination to explore the options for maintaining the EFSF's AAA rating." However, analysts suggested that Germany, Luxembourg and fellow top-rated eurozone countries, Finland and the Netherlands, would not pursue those options and would instead shift their focus to the European Stability Mechanism (ESM), the permanent bail-out fund intended to replace the EFSF. Jacques Cailloux, chief European economist at RBS, said: "Although euro area member states "will explore the options" to keep the EFSF's triple-A, we expect S&P will ultimately align the EFSF's rating with that of France and Austria at AA+. Indeed, in order to maintain the AAA rating of the EFSF, euro area policy makers would have to accept a reduction in the lending capacity of the EFSF by €169bn. Alternatively, they would need to increase their guarantees significantly, something we believe unlikely at a time that the focus is shifting on the ESM. Mrs Merkel appeared to vindicate that analysis yesterday when she said: "The necessary tasks that the EFSF must fulfil in the coming months can be fulfilled with the current methods. The interest rates for the acceptance of certain bonds had already risen a bit anyway. The work of the EFSF will not be torpedoed. We will also work particularly to implement the permanent stability mechanism, the ESM, so soon as possible - this is important regarding investor trust. She said that European leaders must also move even more quickly to implement a fiscal compact "and to do it resolutely, not to try to soften it." RBS said that accepting the downgrade of the EFSF to AA+ would mean its current maximum lending capacity at €440bn should not be impacted and it could therefore finance the second Greek bail-out package or offer support through other EFSF tools. Mr Cailloux was, however, "particularly sceptical" of the chances of leveraging of the EFSF toward its supposed €1 trillion capacity in light of the downgrades. Non-European investors were likely to shun EFSF bonds in favour of German bunds, leaving the fund increasingly reliant on eurozone and bank take-up. The reputation of bail-out funds as the "ultimate backstops" would diminish even further. The rating of the ESM was also in doubt, as it would "face a difficult trade-off between higher lending volume and achieving a AAA rating." Francois Fillon, the French prime minister, said he did not believe the ability of the EFSF to borrow at low rates would be impacted much by the downgrade of France and other eurozone countries. He said: "The EFSF shouldn't borrow at more than what we borrow at. Our borrowing costs are at historic lows.