Moody's Investors Service Inc. said Monday that the stable outlook on France's triple-A credit rating remains under pressure, with risks arising from the growing level of government debt and adverse developments in the euro zone.
Moody's said its opinion doesn't constitute a ratings action and that it would "update the market during the first quarter of 2012" as part of its assessment of sovereign ratings in the European Union.
"Over the next three months, Moody's will monitor and assess the stable outlook against the government's progress in implementing necessary economic and fiscal reform measures, while taking into account any adverse economic or financial market developments," said Francesco Meucci, a spokesman for the rating company.
The firm already said in October it was assessing the stable outlook on France's triple-A rating, due to pressure from high debts and deficits, as well as the possibility the country may have to grant further support to its banks or other euro-zone countries.
"The deterioration in debt metrics and the potential for further contingent liabilities to emerge are exerting pressure on the stable outlook of the French government's triple-A debt rating," Moody's said Monday. "The government has now less room for maneuver in terms of stretching its balance sheet than it had in 2008."
The comments come two days after rival firm Standard & Poor's Ratings Services stripped France of its cherished triple-A rating, citing "the impact of deepening political, financial and monetary problems within the euro zone with which France is closely integrated."
The downgrade to France, the zone's second-largest economy, will make it harder—and potentially more expensive—for the euro zone's bailout fund to help troubled states, because the fund's own triple-A rating depends on those of its constituents. The downgrades also speak to how deeply the concerns over countries on the euro zone's periphery have penetrated its core. Worst-case fears weren't borne out: France avoided the two-notch downgrade S&P had warned of last month.
Bond markets showed a relatively muted reaction to the S&P decision, partly because the downgrade had been so anticipated but also because S&P's rivals continue to rate France triple-A. Some types of investors would only be forced to sell their French bond holdings if the country is downgraded by two of the three major ratings companies.
The cost of borrowing for France was hardly changed from the end of the day Friday, with its 10-year government bond yield one basis point lower at 3.06%, according to Tradeweb.
Moody's currently rates France triple-A with a stable outlook, while Fitch Ratings also ranks the country triple-A but with a negative outlook. France is now rated double-A-plus by S&P with a negative outlook. Moody's highlighted risks to France's rating, both domestically and externally.
"France's continued commitment to implementing the necessary economic and fiscal reform measures as well as visible progress in achieving the targeted sustainability improvements will be important for the stable outlook to be maintained," the firm said.
It said a continued increase in France's debt burden as a percentage of gross domestic product would also keep pressure on the rating.
"More generally, the management of the euro area debt crisis complicates the government 's fiscal consolidation efforts," said Moody's. "The longer the sovereign and bank funding markets remain volatile, the more likely it is that further credit pressures will develop for most euro area countries, including triple-A rated countries such as France."
read more: Olympus Wealth Management
No comments:
Post a Comment