French banks’ exposure to Europe’s sovereign debt crisis has heightened concern about France’s own top-notch AAA credit rating, according to the International Monetary Fund.
Moody’s Investors Service said today in a separate statement that it may cut the credit ratings of BNP Paribas SA, France’s biggest bank, and local rivals Societe Generale SA and Credit Agricole SA because of their investments in Greece.
The renewed focus on French banks shows how the failure of European governments to stem the region’s sovereign debt crisis is having knock-on effects across the continent. Concern about French banks is increasing pressure on President Nicolas Sarkozy to trim the government’s budget deficit after he pushed through an increase in the retirement age last year.
“As an AAA rated country, France’s fiscal position remains subject to high scrutiny, while the rating itself is an important factor for keeping borrowing costs low,” the IMF said today in an Article IV report on the country. “Market participants welcomed last year’s pension reform, but French banks’ strong exposures to some of the euro area’s crisis countries have renewed their attention on French sovereign debt.”
Moody’s affirmed France’s AAA rating on May 4, saying the increase in the retirement age and plans for legal limits on budget deficits are helpful. Standard & Poor’s said on June 10 that France’s rating is safe in the next few years.
‘Speed and Sustainability’
France’s budget deficit amounted to about 7 percent of gross domestic product last year and is forecast at 6 percent of output this year and below 3 percent in 2013.
France’s fiscal plan strikes “the right balance between speed and sustainability,” the IMF said today. “However, the assumptions for next year’s budget on growth and other key parameters should be realistic and not underestimate the future adjustment needs,” it said.
The French economy will expand about 2 percent both this year and next, the IMF said. The French Finance Ministry predicts growth of about 2 percent this year and 2.25 percent next year.
France should prepare a contingency plan for the 2012 budget, the IMF said. The government should also seek ways to improve competitiveness and export performance, as well as maintaining “vigilance” in the face of rising property prices.
The comments on the economy and competitiveness echo those made by Bank of France Governor Christian Noyer, who yesterday urged Sarkozy to speed up his government’s effort to slash its budget deficit and warned politicians against missing fiscal targets.
Source: www.bloomberg.com
Moody’s Investors Service said today in a separate statement that it may cut the credit ratings of BNP Paribas SA, France’s biggest bank, and local rivals Societe Generale SA and Credit Agricole SA because of their investments in Greece.
The renewed focus on French banks shows how the failure of European governments to stem the region’s sovereign debt crisis is having knock-on effects across the continent. Concern about French banks is increasing pressure on President Nicolas Sarkozy to trim the government’s budget deficit after he pushed through an increase in the retirement age last year.
“As an AAA rated country, France’s fiscal position remains subject to high scrutiny, while the rating itself is an important factor for keeping borrowing costs low,” the IMF said today in an Article IV report on the country. “Market participants welcomed last year’s pension reform, but French banks’ strong exposures to some of the euro area’s crisis countries have renewed their attention on French sovereign debt.”
Moody’s affirmed France’s AAA rating on May 4, saying the increase in the retirement age and plans for legal limits on budget deficits are helpful. Standard & Poor’s said on June 10 that France’s rating is safe in the next few years.
‘Speed and Sustainability’
France’s budget deficit amounted to about 7 percent of gross domestic product last year and is forecast at 6 percent of output this year and below 3 percent in 2013.
France’s fiscal plan strikes “the right balance between speed and sustainability,” the IMF said today. “However, the assumptions for next year’s budget on growth and other key parameters should be realistic and not underestimate the future adjustment needs,” it said.
The French economy will expand about 2 percent both this year and next, the IMF said. The French Finance Ministry predicts growth of about 2 percent this year and 2.25 percent next year.
France should prepare a contingency plan for the 2012 budget, the IMF said. The government should also seek ways to improve competitiveness and export performance, as well as maintaining “vigilance” in the face of rising property prices.
The comments on the economy and competitiveness echo those made by Bank of France Governor Christian Noyer, who yesterday urged Sarkozy to speed up his government’s effort to slash its budget deficit and warned politicians against missing fiscal targets.
Source: www.bloomberg.com
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