France's fiscal problems were pressing "owing to the uncertain growth outlook
and the ongoing eurozone crisis, even assuming no wavering in commitment to
fiscal consolidation", Fitch said.
Since Socialist Francois Hollande became president in 2012, his government
has raised taxes and implemented targeted reforms and spending cuts to try to
whittle down the country's huge debt load.
But with the eurozone crisis still alive, and the currency bloc still mired
in recession, the measures have proven ineffective and unemployment soared to a
15-year high of 10.9pc in May.
"The weaker economic outlook is the primary factor behind increases in the
budget deficit and France" needing more time to meet EU rules on government
spending, it said.
Fitch forecasts that the French economy will contract by 0.3pc in 2013 and
then return to slight growth of 0.7pc in 2014.
This is more pessimistic than the government's outlook of 0.1pc growth this
year and 1.2pc in 2014.
French Finance Minster Pierre Moscovici brushed off the downgrade,
maintaining that "French debt is among the safest and most liquid in the
eurozone". With the confidence of investors strong, French borrowing prices were low and
"this confidence reinforces the government's conviction that its strategy is the
right one", he said.... Fitch, which is part French-owned, had warned in its previous appraisal that
France had reached the very limit of being able to hold on to its top grade
grail. But with Fitch now expecting public debt to peak next year at 96pc of gross
domestic product, the agency said it had no choice but to lower the mark, though
with a stable outlook. "The agency commented at the time of its previous rating review that this was
the limit of the level of indebtedness consistent with France retaining its AAA
status assuming debt was firmly placed on a downward path from 2014."
France's debt ratio, the agency added, was "significantly higher" than the
AAA median of 49%.
2 comments:
The recent rout in emerging markets is enticing some investors to jump back in to search for cheap stocks, bonds and currencies. But the selloff is prompting these bargain hunters to be a lot pickier than in the past.
Markets from Brazil to China have tumbled since mid-May amid growing expectations that the U.S. Federal Reserve is preparing to end its $85 billion in monthly bond purchases. That would shut off a flow of easy money into emerging markets just as prospects for economic growth in some of them have begun to dim.
Xia said the government should mobilize its huge foreign exchange reserves, close bankrupt companies and encourage private investment to boost growth.
Personally, I don't believe the 7.5% growth rate published...at all. As this article points out, the truly worrisome part is this:
Indeed, whether China is growing at 8% or 3% is anyone's guess, and is largely irrelevant as long as the country can keep generating the required credit money expansion to avoid stall speed or a crash landing. However, what is very disturbing, is when dissident voices start emerging from within the placid lake that is China's economic hierarchy, such as Xia. His opposition to the Politburo is a far more worrisome sign than if China's GDP will print at 7.7%, 7.4% or stun the world with a just barely 7%+ print.
Aren't all BRIC countries struggling or slowing? Where will growth come from if emerging markets are faltering? Who will finance US debt? How will Germany export more outside the EU? A few of the questions that spring to mind after reading Tyler's article...
We may be at an historic global moment this year....and I've never thought of myself as a gloom and doomer.
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