Thursday 22 February 2018

Sarkozy vows to fight back and pledges radical reform

French President Nicolas Sarkozy pays his respects at the grave of former French prime minister Michel Debreer
French President Nicolas Sarkozy pays his respects at the grave of former French prime minister Michel Debreer

Siobhan Creaton

GLOBAL markets and the euro are braced to come under renewed pressure today.

When markets open, investors will react to the wide-scale credit rating downgrades for many European economies, with European share prices and the euro likely to suffer losses.

Standard & Poor's (S&P) decision to strip France and Austria of their AAA ratings and the downgrading of other EU members that are laden with debt has sparked fears that Europe's debt crisis is worsening.

Yesterday, French President Nicolas Sarkozy appealed for calm and vowed to carry out more reforms to lead the country out of the crisis. In his first public reaction to Friday's downgrade, he pledged to get France back on track.

"The crisis can be overcome provided that we have the collective will and the courage to reform our country," he said.

"We must resist, we must fight, we must show courage, we must remain calm."


German Chancellor Angela Merkel, meanwhile, said the downgrades mean that Europe's leaders must redouble their efforts to resolve the debt crisis.

"The decision confirms my conviction that we have a long way ahead of us before investor confidence returns," she said.

Ireland's long-term BBB+ rating was unchanged. But S&P warned that initiatives taken by European policy makers may be inadequate to prevent a future downgrade.

Ireland hopes to test the bond markets to raise money this year but much will depend on whether Europe's politicians manage to stabilise the debt crisis.

The raft of downgrades comes as S&P believes Europe's politicians are not doing enough to resolve the ongoing debt crisis. Germany was the only euro country to retain its stable AAA rating.

The impact of France's downgrade will be gauged today when it seeks to raise €8.7bn in the market.

The downgrade could mean it will be forced to pay a higher interest rate on this money.

Meanwhile, fears of a debt default by Greece heightened after its creditor banks broke off talks. The government failed to agree how much money investors would lose by swapping their bonds as part of the debt restructuring deal.

"The sticking point is actually coming down to what the interest rate would be on the new bond," Hans Humes, president of Greylock Capital Management LLC and a member of committee negotiating the deal with the government, said.

"If the talks fail and Greece defaults, there will be a lot of contagion," he warned.

"The ball is in their court. If you want to head off what could be a disorderly process, now's the time."

Talks between Greek Prime Minister Lucas Papademos, Finance Minister Evangelos Venizelos and Charles Dallara, the managing director of the IIF, will resume on Wednesday.

Irish Independent

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