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According To 'French' Fitch, France Is Now Rated Higher Than The UK

Tyler Durden's picture




 

Fitch has just downgraded the UK from AAA to AA+ - now lower than France's.

  • FITCH REVISED DOWN U.K.'S ECONOMIC GROWTH IN 2013 TO 0.8%
  • FITCH REVISED DOWN U.K.'S ECONOMIC GROWTH IN 2014 TO 1.8%
  • FITCH CITES WEAKER ECONOMIC, FISCAL OUTLOOK ON U.K.

Fitch doesn't see the UK economy reaching 2007 highs until 2014 - so there's hope?As for debt: Fitch now forecasts that general government gross debt (GGGD) will peak at 101% of GDP in 2015-16 (equivalent to 86% of GDP for public sector net debt, PSND) and will only gradually decline from 2017-18. This compares with Fitch's previous projection for GGGD peaking at 97% and declining from 2016-17 and the 'AAA' median of around 50%.

Of course, no market cares (apart from Cable) yet... though it does seem by GBP's slump all day that this was umm, telegraphed?

 

 

 

FITCH DOWNGRADES UNITED KINGDOM TO 'AA+'; OUTLOOK STABLE

Fitch Ratings-London-19 April 2013: Fitch Ratings has downgraded the United Kingdom's Long-term foreign and local currency Issuer Default Ratings (IDR) to 'AA+' from 'AAA'. The Outlook is Stable. At the same time, the agency has affirmed the UK's Short-term foreign currency rating at 'F1+' and the Country Ceiling at 'AAA'.

The rating actions follow the conclusion of the review of the UK's sovereign ratings initiated on 22 March and resolve the Rating Watch Negative. The previous Negative Outlook on the UK's sovereign ratings had been in place since 14 March 2012.

KEY RATING DRIVERS

The downgrade of the UK's sovereign ratings primarily reflects a weaker economic and fiscal outlook and hence the upward revision to Fitch's medium-term projections for UK budget deficits and government debt. Despite the loss of its 'AAA' status, the UK's extremely strong credit profile is reflected in its 'AA+' rating and the Stable Outlook.

- Fitch now forecasts that general government gross debt (GGGD) will peak at 101% of GDP in 2015-16 (equivalent to 86% of GDP for public sector net debt, PSND) and will only gradually decline from 2017-18. This compares with Fitch's previous projection for GGGD peaking at 97% and declining from 2016-17 and the 'AAA' median of around 50%.

- Fitch previously commented that failure to stabilise debt below 100% of GDP and place it on a firm downward path towards 90% of GDP over the medium term would likely trigger a rating downgrade. Despite the UK's strong fiscal financing flexibility underpinned by its own currency with reserve currency status and the long average maturity of public debt, the fiscal space to absorb further adverse economic and financial shocks is no longer consistent with a 'AAA' rating.

- Higher than previously projected budget deficits and debt primarily reflects the weak growth performance of the UK economy in recent years, partly due to headwinds of private and public sector deleveraging and the eurozone crisis. Fitch has revised down its forecast economic growth in 2013 and 2014 to 0.8% and 1.8%, respectively, from 1.5% and 2.0% at the time of the last review of the UK's sovereign ratings in September 2012. The UK economy is not expected to reach its 2007 level of real GDP until 2014, underscoring the weakness of the economic recovery.

- Despite significant progress in reducing public sector net borrowing (PSNB from a peak of 11.2% of GDP (GBP159bn) in 2009-10, the budget deficit remains 7.4% of GDP (excluding the effect of the transfer of Royal Mail pensions) and is not expected to fall below 6% of GDP and GBP100bn until the end of the current parliament term. The slower pace of deficit reduction means that the next government will be required to implement substantial spending reductions (and/or tax increases) if public debt is to be stabilised and reduced over the medium term.

The Stable Outlook on the UK's sovereign ratings reflects the following factors.

- Under Fitch's baseline economic and fiscal scenario, which assumes a continued policy commitment to reducing the underlying budget deficit and medium-term annual growth potential of 2%-2.25%, government debt gradually falls as a share of national income in the latter half of the decade.

- The long average maturity of public debt (15 years) - the longest of any high-grade sovereign -exclusively denominated in local currency and low interest service burden implies a higher level of debt tolerance than many high-grade peers.

- The international reserve currency status of sterling and the ability and willingness of the Bank of England to intervene in the UK government debt market largely eliminates the risk of a self-fulfilling fiscal financing crisis.

- The gradual improvement in the UK banking sector's capital and liquidity position has further reduced contingent liabilities arising from this sector.

The UK's 'AA+' rating is underpinned by its high-income, diversified and flexible economy as well as a high degree of political and social stability. The monetary policy framework as well as sterling's international reserve currency status afford the UK a high degree of financial and economic policy flexibility. Strong civil and policy institutions and a high degree of transparency enhance the predictability of the business and economic policy environment that compares favourably with peers in the 'AA' category.

Weak economic performance and growth prospects, relatively high levels of private and foreign as well as public debt, along with sizeable twin fiscal and current account deficits, are weaknesses relative to rating peers.

 

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Fri, 04/19/2013 - 12:15 | 3472396 doomandbloom
doomandbloom's picture

Oui!

Fri, 04/19/2013 - 12:21 | 3472434 toys for tits
toys for tits's picture

 

Fitch doesn't see the UK economy reaching 2007 highs until 2014 - so there's hope?

Since they have that they're only lacking 'change'.

Fri, 04/19/2013 - 12:49 | 3472452 hedgeless_horseman
hedgeless_horseman's picture

 

 

The UK's 'AA+' rating is underpinned by its high-income [they do pay the cops well], diversified and flexible economy [The City has Russian, Arab, and Jewish clients] as well as a high degree of political and social stability [about 650 degrees Fahrenheit to be precise].

http://en.wikipedia.org/wiki/2011_England_riots

 

Fri, 04/19/2013 - 13:01 | 3472653 Edward Fiatski
Edward Fiatski's picture

Oy, vey - are the peasants not happy with shovel-ready, shit-shovel jobs?

Fri, 04/19/2013 - 12:29 | 3472475 Fortunate Fool
Fortunate Fool's picture

It's funny that S&P or Moody's are never mentioned as "American S&P" and "American Moody's"... Is the "French" adjective is meant to downgrade (pun intended) the competence of this rating agency. By being American, are the other two rating agencies any more credible. Pardon me, I doubt it...

 

By the way, according to Wikipedia: "The Fitch Group is a jointly owned subsidiary of FIMALAC and Hearst Corporation. On April 12, 2012, Hearst increased their stake in the Fitch Group to 50%.[2] Fitch Ratings and Fitch Solutions are part of the Fitch Group."

 

Heast is a good'ol american company and Fitch is headquartered in London and New York. Fitch is as french as McDonald's is Mexican...

 

By anyway, it's always fun to take a cheap shot at the french, eh? 

Fri, 04/19/2013 - 17:07 | 3474108 No Euros please...
No Euros please we're British's picture

And FIMALAC are...........? Strange you missed that information.

Fri, 04/19/2013 - 12:15 | 3472400 Kirk2NCC1701
Kirk2NCC1701's picture

Mais Oui, mon amis.  We wave our private parts at the Engleeesh!

Fri, 04/19/2013 - 12:17 | 3472415 IridiumRebel
IridiumRebel's picture

WEE WEE

Fri, 04/19/2013 - 12:17 | 3472416 Winston Churchill
Winston Churchill's picture

Vive la manche.

Fri, 04/19/2013 - 12:19 | 3472428 WTF_247
WTF_247's picture

Currency gets it (for today).  I am sure the UK equity markets will rally on that news.  

Fri, 04/19/2013 - 12:20 | 3472430 NotAMathWhiz
NotAMathWhiz's picture

We fart in your general direction.  Now go away or we shall taunt you a second time...

https://www.youtube.com/watch?v=FWBUl7oT9sA

Fri, 04/19/2013 - 12:19 | 3472431 Frastric
Frastric's picture

Fucking frogs...

The musing of a pissed-off english twat.

Fri, 04/19/2013 - 12:21 | 3472440 Poetic injustice
Poetic injustice's picture

In other news, UK based rating agencies thinks French are the losers.

Chinese based agency downgrades all involved.

Fri, 04/19/2013 - 12:24 | 3472456 fuu
fuu's picture

\EJ/ smirks.

Fri, 04/19/2013 - 12:22 | 3472446 Temporalist
Temporalist's picture

Gold Fitchez!

Fri, 04/19/2013 - 12:22 | 3472447 swissaustrian
swissaustrian's picture

The UK's banking system is probably worse off and the North Sea resources are drying up.

FrAAAnce has enarques and unions, they're always going to be fine. Plus they can't print money.

(for the slow here: /sarc)

Fri, 04/19/2013 - 12:23 | 3472455 mdtrader
mdtrader's picture

Nasty head and shoulders pattern on the EUR/USD hourly chart, and the daily chart doesn't look too clever either.

Fri, 04/19/2013 - 13:05 | 3472682 Edward Fiatski
Edward Fiatski's picture

Not much of a HS on the hourly, but the daily does resemble it. There's a cleancut one on the daily for the Cable - testing last support at 1.5230.

Cable has done its ATR today, see you on Monday. :)

Fri, 04/19/2013 - 12:26 | 3472462 Quinvarius
Quinvarius's picture

Meanwhile US Base Money breaks the psychological 3 trillion mark this week... by a lot.

http://research.stlouisfed.org/fred2/series/BASE

Fri, 04/19/2013 - 12:25 | 3472463 CheapBastard
CheapBastard's picture

Bring back Charles II...restore the throne to the Merry Monarch!

Fri, 04/19/2013 - 13:15 | 3472723 Edward Fiatski
Edward Fiatski's picture

I say off with their heads.

You may suckle one last time on that ROYAL COCK though, peasant.

Fri, 04/19/2013 - 12:26 | 3472470 orangegeek
orangegeek's picture

Who fucking cares.  When France defaults, then that will be that, Fitch or no Fitch.

Fri, 04/19/2013 - 12:29 | 3472483 Volaille de Bresse
Volaille de Bresse's picture

Uk's dead banking system weights TEN times the country's GDP. You can thank Thatcher the witch for this. 

Fri, 04/19/2013 - 12:32 | 3472493 wcvarones
wcvarones's picture

What did Abercrombie say?

Fri, 04/19/2013 - 12:33 | 3472505 Bam_Man
Bam_Man's picture

The BOE is obviously not printing fast enough.

Mr. Carney will fix that shortly.

Fri, 04/19/2013 - 12:33 | 3472513 forwardho
forwardho's picture

The phrase "A pot calling the kettle black" comes to mind.

Perhaps " The out house saying the shit hole stinks" is better

Fri, 04/19/2013 - 12:42 | 3472560 Satan
Satan's picture

The prettiest horse at the lasagna factory.

Fri, 04/19/2013 - 12:43 | 3472562 firstdivision
firstdivision's picture

Ahhh one can always count on the French to be brave in the face of impending doom.

Fri, 04/19/2013 - 12:48 | 3472578 Jack Burton
Jack Burton's picture

The rot that underpins the UK economy is poorly understood, even inside the Uk itself. Some important signs of the rot are the fact that in many parts of the UK, government at all levels, is the majority employeer. The UK rode the North Sea Oil boom in the late 80-90's as it deindustrialized the nation, ending most UK heavy industry and beginning a mass financialization of the economy and started the housing speculation bubble. The UK has undergone a mass immigration wave unprecidented in UK history, both legal entrants from the EU and illegal from across Africa and the Middle East. Many immigrants went on benefits and became a burden to the tax payers and many others entered the labor pool as low wage workers and this helped drive wages down for private sector workers in the non skilled fields. The UK has begun a mass money printing scenario to meet it's obligations at a time when tax revenue falls way short of spending.

In the UK only two classes of people now earn a good living. Government employees, paid with tax revenues and money printing, and those working in the financialized economy, bankers, insurance etc. The housing bubble has been used to create household wealth, but as we know from the USA experience, this bubble can burst and leave bodies all over the place.

UK is in a death spiral, and it continues the EU mandated open borders policy, which is starting to collapse the Nation Health Care System and the Governemnt Benefits programs, as millions flood into the UK cities from across the globe to live off of free housing, free food, free education, free health care and other free social benefits, all paid for with taxes on the few workers and the BoE money printing!

Fri, 04/19/2013 - 13:16 | 3472735 Edward Fiatski
Edward Fiatski's picture

Bingo.

The £Pound will be defunct and gone by the end of this decade - I think that is what is required for a New Babylon World  Order in Europe to succeed.

Fri, 04/19/2013 - 13:16 | 3472737 smacker
smacker's picture

Much of what you say about the UK is true.

Under the last socialist Labour Govt government, immigration was out of control and there's now an estimated ~2 million illegal immigrants living in Britain, but nobody knows the true number as they lost control. The current Tory/LibDem Coalition are now planning to wreck tourism from Brazil and other Latin American countries by requiring pre-approved tourist visas before travelling to the UK. Of course these countries will retaliate in kind. And this will not solve the immigration anyway since the vast majority of immigrants into the UK come from India/Pakistan, Middle East and North Africa. We are now paying the price of our defunct Empire.

But the overriding problem is obviously excessive government spending on the items you list, including NHS & Welfare. But several areas of excessive govt spending which get virtually zero exposure is the money goverment spends on programs which have no benefit to society at all. Namely, the bloated Establishment, public sector pensions, pay-offs and security for previous political elites (eg Mr Tony Blair & Gordon Brown) and of course, on running government itself. Although cutting out large sums on these things would not solve Britain's debt crises, it would certainly be the right place to start.

Fri, 04/19/2013 - 12:46 | 3472583 sudzee
sudzee's picture

Will they downgrade the US at 4:01pm?

Fri, 04/19/2013 - 13:49 | 3472942 Colonel Klink
Colonel Klink's picture

Outlook Stable....Bwahahahahhaa.   Kind of like how a satellite in a decaying orbit is stable.  Hahahahaha

Don't believe it suckers!

Fri, 04/19/2013 - 13:49 | 3472956 GrinandBearit
GrinandBearit's picture

Bullish!

Fri, 04/19/2013 - 14:28 | 3473109 screw face
screw face's picture

#PLUTONIUM up  $4,000.00@gram?

#camel down             $8.00@k?

Who has that stinking big red button today.

Fri, 04/19/2013 - 14:52 | 3473321 venturen
venturen's picture

Kryptonite  is unavailable at any price! 

Fri, 04/19/2013 - 14:52 | 3473317 brucyy
brucyy's picture

fuck france anyway

their credit rating should have gone junk the minute they went full socialist  ,and their tax overlord stupid enough to get caught  

Fri, 04/19/2013 - 15:02 | 3473370 chances
chances's picture

uk sould be junk rated

Fri, 04/19/2013 - 18:03 | 3474338 lolmao500
lolmao500's picture

UK, France, the US and Italy should be taken down several notches, if not junked altogether. Same goes for Japan.

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