Fitch Ratings says that it does not view France as a country in crisis and is not currently considering a downgrade from its triple-A rating as long as its debt isn’t pushed up sharply by shocks related to the euro-zone debt crisis, the head of global sovereign ratings at the firm said. David Riley, has been making the rounds in Europe and making a lot of public statements in regarding to the EU and the Euro.
Fitch Ratings Says France To Keep AAA
“France is not a crisis country,” stated Riley in Paris at a conference, one of several Fitch is conducting this week in European cities.
France’s rating has been in focus recently, after Standard & Poor’s put the country along with the bulk of the euro zone–on notice of possible review for a downgrade last month. S&P said at the time that it would make a decision as soon as possible after a European Union December summit in Brussels and said it could lower France’s rating by as much as two notches, a warning that has left investors on tenterhooks for weeks now. Moody’s is expected to announce soon the results of its monitoring of the stable outlook on France’s triple-A rating. Recently, the ratings agencies have come under fire for the downgrades and the warning, which are coming too often without precise information. The rating agencies are trying to look more intune and transparent to the markets, as they are being held responsible for the internation mortgage crisis, as they continued to rate many bad investments and credit swaps with Triple-A without looking into the paper or the value.
Mr. Riley said France will keep its triple-A rating–Fitch recently lowered the country’s outlook to negative–if its debt stabilizes around 90% of gross domestic product and then begins declining in the time around 2013 to 2014. That is the rating agency’s baseline scenario. President Sarkozy, came out on the attack when Frances rating were put underconsideration and rightly so.
However, France wouldn’t be in line with triple-A status if its liabilities to the euro-zone bailout are all called on, there is low growth and the government has to provide some support to the financial sector. The view is that the until a clear plan is presented and the emergency fund is established with enough funds to bailout the required countries, no one knows for sure the demand that will be placed on France and Germany to provide most of these funds.
The rating agencies repeated their call for the European Central Bank to step up its involvement in resolving the crisis, especially as Italy has been caught in the market’s spotlights. It is quite difficult to rate governments when you can not look at long term plans and financial demands.
Italy also needs a credible financial firewall which ultimately requires a much more active, explicit action from the ECB. The ECB can expand operations without threatening its inflation target.
Originally posted here
