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Moody’s Might Downgrade France Further Still

From Reuters:

Moody’s warns of fresh downgrade if French reforms stall

By Daniel Flynn | November 20, 2012

PARIS (Reuters) – Credit ratings agency Moody’s, which stripped France of its AAA rating, would downgrade its creditworthiness further if the Socialist government fails to implement announced reforms, its lead France analyst said on Tuesday.

"We would downgrade the rating further in the event of an additional material deterioration in France’s economic prospects or in a scenario in which there were difficulties in implementing the announced reforms," Dietmar Hornung, Moody’s lead analyst for France’s sovereign rating, told Reuters.

Moody’s cut France to Aa1 with a negative outlook on Monday, citing structural economic challenges and a sustained loss of competitiveness in Europe’s second-largest economy

Hornung said France’s 2013 budget, which included 30 billion euros in deficit-cutting measures, and a competitiveness pact unveiled this month aimed at reducing companies labor costs were "significant steps"…

Too bad they will never happen.

He said these had helped to limit the size of Moody’s downgrade to just one notch, from Aaa to Aa1.

"We still think the 2013 budget and the medium-term budget plan is based on too optimistic growth assumptions," Hornung said…

Back when Standard & Poor and others lowered the US credit rating for the first time in history the news media and the rest of the Democrats tried to say it was because the US refused to raise taxes on the rich.

Now France’s socialist government has increased the tax rate on the rich to 75% and they still were downgraded. Why is that?

And here is more on this from Reuters, which includes a few more details:

France to answer ratings downgrade with reforms

By Leigh Thomas and Daniel Flynn | November 20, 2012

PARIS (Reuters) – France said it would respond to Moody’s credit downgrade by pushing ahead with economic reforms but complained the ratings agency had overlooked efforts already taken to revamp the euro zone’s second largest economy…

The government is planning the toughest belt-tightening effort in 30 years in 2013 but must also try and halt a growth slow-down that has seen unemployment surge to 13-year highs…

Moody’s said France could downgrade again if efforts to free up the rigid labor market and overhaul an economy where public spending accounts for 57 percent of output ran into trouble…

So what’s the problem? It sounds like France is doing everything the way Obama wants things to be done.

The downgrade follows concerns raised by the International Monetary Fund that France could be left behind as Italy and Spain reform at a faster pace…

With France’s 2-trillion-euro economy teetering on the brink of recession, Hollande surprised many this month by unveiling measures to spur industrial competitiveness, chief among them the granting of 20 billion euros in annual tax relief to companies, equivalent to a 6 percent cut in labor costs…

Hilarious. It’s too late to try to close the barn door now.

This article was posted by Steve Gilbert on Tuesday, November 20th, 2012. Comments are currently closed.

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