Egan-Jones downgrades France's credit rating
Ratings agency Egan-Jones on Wednesday cut its rating on debt issued
by the Republic of France by one notch, citing a 21 percent increase in
the country's debt in the last two fiscal years, which it called a
"disastrous trend."
The agency predicted worse days ahead for the world's
fifth-largest economy and cut France's senior rating to "A-" from "A."
The reduction was based on a 21-point spike in the ratio of France's
debt to its GDP between 2008 and 2010 plus weak growth in the Eurozone
and rising unemployment.
Egan-Jones estimated that France's debt is now equal to about 90
percent of its GDP. The firm also noted that the country is facing
rising pension costs, and the system is currently running at a deficit.
Egan-Jones also said it expects France to face rising costs for funding its debt as the crisis in Europe evolves.
"The deterioration in France's credit metrics combined with the
needed support for France's banks are likely to pressure the country,"
the report said. "A major catalyst is likely to be the year-end
financials for France's banks; watch for a significant support program
to be announced over the next couple of weeks."
Egan-Jones is far smaller than Standard & Poor's, Fitch
Ratings and Moody's Investors Service, which dominate some 95 percent of
the global rating market.
The big three have not changed their top ratings on France,
although Fitch and Moody's have warned that they could downgrade the
nation's debt ratings.
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