Europe was starting to look a bit healthier last week after Italy and Spain conducted successful debt auctions of $25.4 billion in new bonds at significantly lower yields. This was enough to cause new European Central Bank President Mario Draghi to see “tentative” signs of eurozone “stabilization.”

An even more shocking development came when German short-term debt yielded negative interest rates (-0.0122%) for six-month German bills! This marks the first time that German rates ever fell below zero. Even with a guaranteed loss, demand for German six-month bills was strong, with a bid-to-cover ratio of almost 2 to 1, proving that German debt still is the most solid and stable sovereign debt in the eurozone.

As I said, Europe seemed to be doing pretty well … until Friday, when Standard & Poor’s downgraded Austria and France from AAA to AA+. Seven other eurozone countries were downgraded on the same day, including Italy, Portugal, and Spain. Fortunately, S&P left Germany’s debt at the lofty AAA level.

Fitch Ratings also is re-examining Europe’s credit ratings. David Riley, head of sovereign debt ratings at Fitch, said a “cataclysmic” collapse of the euro could take place if the ECB does not step up its bond buying to save Italy from its enormous debt burden. In response, the euro dropped below $1.27 last week.

The ECB did not directly respond to Fitch’s criticism, but both the ECB and the Bank of England decided to leave their key short-term interest rates unchanged during their monthly meetings Thursday. The ECB apparently is satisfied with its plan to flood eurozone banks with 1% loans for up to three years.