France Says Rating Safe Despite Moody’s Warning – 10/18/2011

For Your Entertainment (FYE)’s

“France insisted on Tuesday its triple-A credit rating was safe despite a warning shot from ratings agency Moody’s but it acknowledged growth would probably miss its target and more belt tightening may be needed ahead of elections next year.”

“Moody’s raised the prospect of one of the pillars of the euro zone losing its coveted triple-A status, saying on Monday it could place France on negative outlook in the next three months if the costs for helping to bail out banks and other euro zone members overstretched its budget.”

” Moody’s also cited a downside risk to France’s economic growth outlook, which could complicate efforts to cut a budget deficit forecast for 5.7 percent of gross domestic product (GDP) this year—roughly the same level as bailed out Portugal.

Economic growth in France, the euro zone’s second-largest economy, ground to a halt in the second quarter. While most economists expect a pick-up later this year, they see weak growth continuing in the medium-term as unemployment remains mired at around 9 percent, undermining domestic consumption.”


” “The banks’ recapitalisation is just a one-shot operation. This would impact the debt, but the real problem is the trajectory of public finances and therefore growth,” said Jean-Louis Mourier of brokerage Aurel Leven BCG.

“The problem with French public finances is not so much the level of the debt, which is comparable to Germany’s: the problem is that economic growth is the road towards restoring public finances, and the growth outlook for France is weak for the coming years,” he said.”


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