Moody's gives France bit of breathing room
January 17, 2012, Tuesday
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FRENCH President Nicolas Sarkozy secured a small boost from Moody's rating agency yesterday following a bruising downgrade last week of the way the country had been handling its economy.
Moody's said it was maintaining France's top AAA rating and stable outlook for its debt. Rival agency Standard & Poor's, more downbeat about the prospects for France and Europe as a whole, stripped France of its cherished triple A rating last Friday.
Though the downgrades late Friday had been expected, they served as a reminder that the 17 countries that use the euro as their currency still have a long way to go to get a handle on the two-year-old debt crisis.
Europe's economies will likely remain the focus of attention across markets all week as a number of bond auctions are due at the same time as Greece tries to clinch a debt-reduction deal with its private investors.
Sarkozy's budget minister Valerie Pecresse yesterday said she was optimistic that S&P's knockdown would not lead to a rise in the country's borrowing costs.
In its announcement, Moody's cited the French economy's overall strength but said bleak growth prospects in France and the region present "risks to the French government's fiscal consolidation plans."
Moody's had said in October it was putting France on review, as Sarkozy and other European leaders struggled to find solutions to Europe's protracted debt crisis. It said yesterday that it "will update the market during the first quarter of 2012 as part of the initiative to revisit the overall architecture of our sovereign ratings in the EU."
The rating agency detailed the strengths of the French economy, but noted that the country's debt levels have deteriorated because of the "global economic and financial crisis" and were now among the weakest of all AAA countries.
"France, like other eurozone sovereigns, may face a number of challenges in the coming months. The need to provide additional support to other European sovereigns or to its own banking system cannot be excluded. In that case this could give rise to significant new (contingent) liabilities for the government's balance sheet," Moody's warned.
Moody's said the government has less room to maneuver than during the 2008 meltdown.
Moody's said it was maintaining France's top AAA rating and stable outlook for its debt. Rival agency Standard & Poor's, more downbeat about the prospects for France and Europe as a whole, stripped France of its cherished triple A rating last Friday.
Though the downgrades late Friday had been expected, they served as a reminder that the 17 countries that use the euro as their currency still have a long way to go to get a handle on the two-year-old debt crisis.
Europe's economies will likely remain the focus of attention across markets all week as a number of bond auctions are due at the same time as Greece tries to clinch a debt-reduction deal with its private investors.
Sarkozy's budget minister Valerie Pecresse yesterday said she was optimistic that S&P's knockdown would not lead to a rise in the country's borrowing costs.
In its announcement, Moody's cited the French economy's overall strength but said bleak growth prospects in France and the region present "risks to the French government's fiscal consolidation plans."
Moody's had said in October it was putting France on review, as Sarkozy and other European leaders struggled to find solutions to Europe's protracted debt crisis. It said yesterday that it "will update the market during the first quarter of 2012 as part of the initiative to revisit the overall architecture of our sovereign ratings in the EU."
The rating agency detailed the strengths of the French economy, but noted that the country's debt levels have deteriorated because of the "global economic and financial crisis" and were now among the weakest of all AAA countries.
"France, like other eurozone sovereigns, may face a number of challenges in the coming months. The need to provide additional support to other European sovereigns or to its own banking system cannot be excluded. In that case this could give rise to significant new (contingent) liabilities for the government's balance sheet," Moody's warned.
Moody's said the government has less room to maneuver than during the 2008 meltdown.
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