Friday

29th Jul 2016

Ratings agency raises alarm on core EU economy

In a sign that the eurozone's ongoing debt crisis could infect its second biggest economy, US credit agency Moody's has indicated it might lower France’s triple-A rating.

"Elevated borrowing costs persisting for an extended period would amplify the fiscal challenges the French government faces amid a deteriorating growth outlook, with negative credit implications," it said on Monday (21 November) in a weekly update.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

  • Dark clouds may be gathering over Paris (Photo: Bas Lammers)

The interest rate on French government bonds has stayed relatively low this year, but went up over the course of last month amid turmoil in Greece and Italy.

At 3.7 percent last week, up from an average of 2.78 percent this year, it is still nowhere near the level at which other eurozone countries have been forced to seek a bail-out. But the difference compared to German bonds, deemed safest by investors, did breach 200 basis points last week, a record since the introduction of the euro.

The French tteasury was quick to downplay the recent hike in borrowing costs. "France's average financing rate for medium- and long-term debt remains low," it said in a statement.

Francois Baroin, French finance minister, added that the current interest rates in by France "correspond to financing conditions which are very favourable."

France announced a fresh round of austerity measures earlier this month in a bid to stem the contagion and has regularly made statements to reassure markets of the soundness of its economic plans. Baroin repeated on Monday "one more time, the untouchable objective of reducing the public deficits."

France is one of six eurozone countries – aside from Austria, Finland, Germany, Luxembourg, the Netherlands – with a top-level credit rating.

But it has come onto market radars due to slow economic growth and its banks' heavy exposure to Greece.

But ratings agencies' credibility was put under the spotlight earlier in November when Standard & Poor's mistakenly sent out a newsletter suggesting it had lowered France's credit rating.

Downgrading France's credit rating would have a series of knock-on effects. It is one of the biggest contributors to the eurzone's bail-out fund, the European Financial Stability Fund, so downgrading France would imply a downgrading of the fund.

Stakeholders' Highlights

  1. Dialogue Platform
  2. GoogleHelping Emergency Services Find You When You Need It Most
  3. Counter BalanceWhat's New in the Investment Plan for Europe: Business as Usual or True Innovation ?
  4. Belgrade Security ForumMigration, Security and Solidarity within Global Disorder: Academic Event 2016
  5. GoogleHow Google Fights Piracy: Creating Value While Fighting Piracy
  6. EJC"My Visit to Israel" - Opinion by MEP Lopez Aguilar, Chair of the EP Working Group on Antisemitism
  7. World VisionChildren Migrating, Out of School and at Work as Hunger Deepens in Southern Africa
  8. European Healthy Lifestyle AllianceStand-Up (and Exercise) to Prevent Chronic Diseases
  9. Centre Maurits CoppietersLaunches a Real-time News Hub Specialised in EU Stakeholders
  10. GoogleEU-US Privacy Shield: Restoring Faith in Data Flows and Transatlantic Relations
  11. World VisionWorld Leaders & Youth Advocates Launch Partnership to End Violence Vs. Children
  12. Counter BalanceReport: Institutionalised Corruption in Romania's Third Largest Company