| Click for the Finfacts Ireland Portal Homepage |

Finfacts Business News Centre

Home 
 
 News
 Irish
 Irish Economy
 EU Economy
 US Economy
 UK Economy
 Global Economy
 International
 Property
 Innovation
 
 Analysis/Comment
 
 Asia Economy

RSS FEED


How to use our RSS feed

Follow Finfacts on Twitter

 
Web Finfacts

See Search Box lower down this column for searches of Finfacts news pages. Where there may be the odd special character missing from an older page, it's a problem that developed when Interactive Tools upgraded to a new content management system.

Welcome

Finfacts is Ireland's leading business information site and you are in its business news section.

Links

Finfacts Homepage

Irish Share Prices

Euribor Daily Rates

Irish Economy

Global Income Per Capita

Global Cost of Living

Irish Tax - Income/Corporate

Global News

Bloomberg News

CNN Money

Cnet Tech News

Newspapers

Irish Independent

Irish Times

Irish Examiner

New York Times

Financial Times

Technology News

 

Feedback

 

Content Management by interactivetools.com.

News : EU Economy Last Updated: Nov 20, 2012 - 8:35 AM


Moody's removes France's triple A credit rating status
By Finfacts Team
Nov 20, 2012 - 8:32 AM

Email this article
 Printer friendly page

Moody's on Monday downgraded France's credit rating from Aaa to Aa1. The loss of its triple A status follows a downgrade by Standard & Poor’s last January.

“France’s fiscal outlook is uncertain as a result of its deteriorating economic prospects, both in the short term due to subdued domestic and external demand” and “structural rigidities” in the longer term, Moody’s said in a statement last night.

France last reported an annual budget surplus in 1974; it has had a trade deficit every year since 2002.

Moody's decision to downgrade France's rating and maintain the negative outlook reflects the following key interrelated factors:

"1) France's long-term economic growth outlook is negatively affected by multiple structural challenges, including its gradual, sustained loss of competitiveness and the long-standing rigidities of its labour, goods and service markets.

2) France's fiscal outlook is uncertain as a result of its deteriorating economic prospects, both in the short term due to subdued domestic and external demand, and in the longer term due to the structural rigidities noted above.

3) The predictability of France's resilience to future euro area shocks is diminishing in view of the rising risks to economic growth, fiscal performance and cost of funding. France's exposure to peripheral Europe through its trade linkages and its banking system is disproportionately large, and its contingent obligations to support other euro area members have been increasing. Moreover, unlike other non-euro area sovereigns that carry similarly high ratings, France does not have access to a national central bank for the financing of its debt in the event of a market disruption.

At the same time, Moody's explains that France remains extremely highly rated, at Aa1, because of the country's significant credit strengths, which include (i) a large and diversified economy which underpins France's economic resiliency, and (ii) a strong commitment to structural reforms and fiscal consolidation, as reflected in recent governmental announcements, which may, over the medium term, mitigate some of the structural rigidities and improve France's debt dynamics.

The current issue of  The Economist says France is the "time-bomb at the heart of Europe."

It highlights:

  • Public spending is 57% of GDP (gross domestic product). For years it has been losing competitiveness to Germany and the trend has accelerated as the Germans have cut costs and pushed through big reforms. Without the option of currency devaluation, France has resorted to public spending and debt.;
  • Debt-to-GDP is 90%;
  • French firms are burdened by overly rigid labour- and product-market regulation, exceptionally high taxes and the Eurozone’s heaviest social charges on payrolls. Not surprisingly, new companies are rare. France has fewer small and medium-sized enterprises, today’s engines of job growth, than Germany, Italy or Britain;
  • No new company has entered the CAC-40 stock market index since 1987;
  • Trade unions resist any reforms;
  • France continues to have a high standard of living, and has some of the best companies in the world, but growth has stalled;
  • The external current-account deficit has swung from a small surplus in 1999 into one of the Eurozone’s biggest deficits;
  • Unemployment is 10%. Youth unemployment much higher;
  • France's borrowing rates remain low but that may not last;
  • "Yet set against the gravity of France’s economic problems, François Hollande, France's president, still seems half-hearted. Why should business believe him when he has already pushed through a string of leftish measures, including a 75% top income-tax rate, increased taxes on companies, wealth, capital gains and dividends, a higher minimum wage and a partial rollback of a previously accepted rise in the pension age? No wonder so many would-be entrepreneurs are talking of leaving the country."

Check out our subscription service, Finfacts Premium , at a low annual charge of €25 - - if you are a regular user of Finfacts, 50 euro cent a week is hardly a huge ask to support the service.

Related Articles
403 Forbidden

Forbidden

Execute access is denied.


© Copyright 2011 by Finfacts.com

Top of Page

EU Economy
Latest Headlines
Eurozone annual inflation in January at -0.6%; Unemployment rate at 11.4% in December
Swiss franc surge squeezes eastern European homeowners
Europe's Worst Exporter: Poor export performance of Greece
German government to raise 2015 growth forecast to 1.5%
Manufacturing and services activity rise in Eurozone at start of 2015
Euro's effective exchange rate down 10% in six months
Spain added 434,000 jobs in 2014 - 24% of total employee jobs temporary
ECB launches quantitative easing of up to €1.1tn
ECB keeps rates unchanged ahead of expected QE announcement
ECB keeps rates unchanged ahead of expected QE announcement
ECB expected to announce bond buying/ "money printing" program today
Spectre of deflation could prove disastrous for equity markets
Germany's economy grew in 2014 at best in 3 years; Third straight budget surplus
Industrial production rose in the Eurozone in November
European Parliament likely to establish special committee on tax evasion/ avoidance
Germany will grow by 1% in 2015
Germany, France and UK report grim economic data
Impact of euro QE in a deflationary world
Eurozone unemployment rate stable at 11.5% in November; Austria lowest at 4.9%
Eurozone annual inflation dips in 2014 - deflation risk hits red
Eurozone service sector grew in December at slow pace
Euro falls to nine-year low as US dollar rises
Eurozone manufacturing close to stagnation in December
Investor sentiment in Germany rose sharply in December
Eurozone business activity grew at a slightly faster rate in December
ECB hopes SME firms will gain from Thursday's refinancing operations
Ifo Institute says German economy to gain impetus in 2015
German per capita standard of living highest in Europe; Ireland below EU average
Youth unemployment problem in Eurozone pre-dated crisis
German imports fell sharply in October; Exports at monthly record high
German jobs rise all in full-time employment unlike in UK, Ireland
ECB to consider QE in January; Cuts forecasts
ECB and Bank of England keep rates at record lows
ECB Meeting: Draghi may reaffirm plans for QE or fudge it
Eurozone retail sales volume up in October - remains at 2004 level
German manufacturing wages are the highest of big industrial nations
Germany, France and Italy call for EU directive on tax reform
Manufacturing PMI surveys show Germany, France & Italy contracted in November
Eurozone inflation fell to 0.3% in November; Jobless rate in Germany lowest in Europe in October
German consumer climate improving as year draws to close