France's top AAA credit rating is likely to be downgraded and Germany could easily follow as the costs of bailing out weaker eurozone economies push up their own debt piles, says credit hedge fund firm Cairn Capital's chief investment strategist.

London-based Cairn, which has $24.5 billion in assets under management and advice across its business, said either future contributions to the European Financial Stability Facility (EFSF) rescue fund, or France's own economic troubles, could see it lose its coveted rating.
"There are very deep economic flaws in the whole euro mechanism," said Graham Neilson, citing high debt levels, weak growth, divergence between member states and the European Central Bank's focus on inflation expectations. "France is likely to be downgraded either on its own metrics but more likely as a result of potentially higher EFSF costs. The bigger the EFSF, the more France is liable (and) the worse France's credit rating the more it could be liable."
Some commentators have suggested the EFSF, which will be able to give loans to countries, buy sovereign bonds and lend governments money to recapitalise banks, needs to be raised to as much as one trillion euros from 440 billion euros currently.