Moody's warning about future rating downgrade for France
Published 21/11/2011 | 10:54
MOODY'S declared today that a recent rise in interest rates on French government debt – coupled with weaker economic growth prospects - could be negative for France's credit rating.
The rating agency said the deteriorating market climate was a threat to the country's credit outlook, but not at this stage to its actual rating.
According to senior credit officer Alexander Kockerbeck: "Elevated borrowing costs persisting for an extended period would amplify the fiscal challenges the French government faces amid a deteriorating growth outlook, with negative credit implications,"
In a Weekly Credit Outlook, Moody's said a one percentage point increase in yields roughly equates to an additional €3 billion a year of funding costs.
A month ago, Moody's said it could place France on negative outlook in the next three months if the costs for helping to bail out banks and other euro zone members overstretched its budget.
The warning led to further losses on European stock markets, with Paris and Frankfurt both falling more than 2.5pc and London's FTSE down 2pc.