On the heels of negative press for France and the possibility of a downgrade from its top-notch credit rating, the third of the big three ratings agencies has weighed in with a favorable outlook for the European power…at least for now.
Fitch affirmed France’s long-term foreign and local currency issuer default ratings and its senior debt at “AAA” status. Additionally, its outlook was upgraded from negative to stable. From Fitch:
“The affirmation of France's 'AAA' status is underpinned by its wealthy and diversified economy, effective political, civil and social institutions and its financing flexibility reflecting its status as a large benchmark euro area sovereign issuer. In addition, the French government has adopted several measures to strengthen the creditability of its fiscal consolidation effort.” However, based on problems in other European Union nations, Fitch predicted the chance of a French credit rating downgrade within the next two years at about 50%.
Fitch wasn’t so kind to everyone in Europe on Friday as six – "PIIGS nations" members Italy, Spain and Ireland as well as Belgium, Slovenia and Cyprus – were put on a new downgrade watch on debt and growth concerns.
In recent weeks, Moody’s Investment Services had placed France on notice that it is in danger of losing its long-held AAA sovereign credit rating on concerns that aren’t so much based on its own situation, but those of rising borrowing costs/bond yield activity tied to collateral damage from problems in other high debt European nations. It is the second time this year Moody’s has released a public warning about France, which along with Germany has been forced to carry the load for a cluster of debtor nations. Standard & Poor’s later put both France and German on warning on a day when 15 European Union members simultaneously were placed on its negative watch. The rational was over “systemic stresses in the euro zone that have risen in recent weeks to the extent that they now put downward pressure on the credit standing of the euro zone as a whole.”
Brian Shappell, NACM staff writer