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Fitch Downgrades France To AA: Full Text
And the final punch in the gut on this bloodbathy Friday some from French Fitch which just downgraded France from AA+ to AA.
Fitch Downgrades France to 'AA'; Outlook Stable
Fitch Ratings has downgraded France's Long-term foreign and local currency Issuer Default Ratings (IDR) to 'AA' from 'AA+'. This resolves the Rating Watch Negative (RWN) placed on France's ratings on 14 October 2014. The Outlooks on France's Long-term ratings are now Stable. The issue ratings on France's unsecured foreign and local currency bonds have also been downgraded to 'AA' from 'AA+' and removed from RWN. At the same time, Fitch has affirmed the Short-term foreign currency IDR at 'F1+' and the Country Ceiling at 'AAA'.
KEY RATING DRIVERS
The downgrade reflects the following factors and their relative weights:
HIGH
When it placed the ratings on RWN in October, Fitch commented that it would likely downgrade the ratings by one notch in the absence of a material improvement in the trajectory of public debt dynamics following the European Commission's (EC) opinion on France's 2015 budget. Since that review, the government has announced additional budget saving measures of EUR3.6bn (0.17% of GDP) for 2015, which will push down next year's official headline fiscal deficit target to 4.1% of GDP from the previous forecast of 4.3%. On its own, this will not be sufficient to significantly change Fitch's projections of France's government debt dynamics.
The 2015 budget involves a significant slippage against prior budget deficit targets. The government now projects the general government budget deficit at 4.4% in 2014 (up from 3.8% in the April Stability Programme with the slippage led by weaker than expected growth and inflation) and 4.1% in 2015 (previously 3.0%), representing no improvement from the 4.1% of GDP achieved in 2013. It has postponed its commitment to meet the headline EU fiscal deficit threshold of at most 3% of GDP from 2015 until 2017.
In the draft 2015 budget, the authorities projected the gross general government debt (GGGD) to GDP ratio to peak higher at 98% and later in 2016 (previously in the Stability programme at 95.6% in 2014 and 2015) and fall more slowly to 97.3% in 2017 (previously 91.9%) and 92.9% in 2019. The projections compare with the 'AA' category median for GGGD of 37%. The only 'AA' range country with a higher debt ratio is Belgium (AA/Negative). Even under the official forecast, the capacity of the public finances to absorb shocks has been significantly reduced. Fitch expects the debt to GDP ratio to peak higher at close to 100% of GDP, with a slower decline to 94.9% of GDP by the end of the decade.
Risks to Fitch's fiscal projections remain on the downside owing to the uncertain outlook for GDP growth and inflation in the near term and the increased uncertainty over the government's ability to deliver on a fiscal consolidation path. Reflecting these concerns, Fitch's medium-term growth forecasts are somewhat weaker and budget deficits wider than official projections.
MEDIUM
The weak outlook for the French economy impairs the prospects for fiscal consolidation and stabilising the public debt ratio. The French economy underperformed Fitch's and the government's expectations in 1H14 as it struggled to find any growth momentum, in common with a number of other eurozone countries. Underlying trends remained weak despite the economy growing more strongly than expected in 3Q, when inventories and public spending provided an uplift. Euro depreciation and lower oil prices will provide some boost to growth in 2015. Fitch's near-term GDP growth projections are unchanged from the October review of 0.4% in 2014 and 0.8% in 2015, down from 0.7% and 1.2% previously. Continued high unemployment at 10.5% is also weighing on economic and fiscal prospects.
The on-going period of weak economic performance, which started from 2012, increases the uncertainty over medium-term growth prospects. The French economy is expected to grow less than the eurozone average this year for the first time in four years. The French government is implementing a programme of structural reforms. However, the quantitative impact of recent structural reforms is uncertain, and in Fitch's view does not appear sufficient to reverse the adverse trends in long-term growth and competitiveness.
The OECD estimates that the impact of economic reforms could take longer to materialise than expected by the authorities. Its October 2014 report on French structural reforms suggests that measures already undertaken could raise GDP by a cumulative 1.2ppt in five years and 3.0pp in ten years. This is equivalent to an annualised impact on growth of 0.2ppt and 0.3pp, respectively. Adding announced measures yet to be implemented, the impact on GDP rises to 1.6ppt over five years and 0.3ppt annually. However, these estimates are highly sensitive to assumptions and there are risks to policy design and implementation of some of the measures. We continue to believe estimates of long-term growth potential around 1.5% are plausible, down from over 2% in the 1980s. This would be consistent with applying the OECD's estimates for the impact of structural reforms on growth to the EC's current estimate of trend growth at 1.2%.
In Fitch's view, the latest deviations from budget targets and EU excessive deficit procedure commitments weaken fiscal credibility. This is the second time the French government has postponed meeting the EU 3% headline deficit threshold since end-2012. This is despite the introduction of a High Council of Public Finances and new fiscal framework in France and the reinforced EU policy framework.
Despite the additional measures, the EC November opinion on 2015 was that France is at risk of non-compliance with the provisions of the Stability and Growth Pact. Furthermore, it states that "the information available so far indicates that France has not taken effective action for 2014". If that is its final view and agreed by the EU Council, and France then fails to take effective action it could potentially incur a fine in the form of a deposit of 0.2% of GDP. The EC will reassess France's position in March 2015 after official data on 2014 budget performance is made available by Eurostat and consider the next steps.
The French High Council of Public Finance's (HCPF) opinion on the government's latest economic forecast was that the lower GDP growth rates projected for 2016-2017 were more realistic than previous forecasts but still reflect an optimistic view of the external environment and domestic investment potential. The HCPF's opinion on the government's fiscal projections in the draft 2015 budget was that there is a risk of deviation from the medium-term objective of lowering the structural deficit from 2.5% of potential GDP in 2013 to 0.4% by 2019.
France's 'AA' IDRs and Stable Outlooks also reflect the following main factors:
Fitch judges financing risk to be low, reflecting an average debt maturity of seven years, low borrowing costs and strong financing flexibility. Government debt is entirely euro-denominated rather than in foreign currency.
The government has stated its intention to continue with structural reforms in 2015, including territorial reform and a law on growth. As stated above, these have the potential to raise trend growth.
France has a wealthy and diversified economy. It has a track record of relative macro-financial stability including low and stable inflation. It also benefits from moderate levels of household debt and a high household savings rate. Political stability and governance is entrenched by strong and effective civil and social institutions.
While the current account balance has generally been on a deteriorating trend for the past 10 years due to France's loss of export market share, at 1.3% of GDP in 2013 the deficit is not excessive. Fitch projects the deficit to stabilise around current levels. However, France's net external debt is significantly higher than most rating peers.
There is low risk from contingent liabilities. In recent years, the financial sector has been cleaning up its balance sheets, strengthening funding, liquidity, capital and leverage. The risks from the eurozone crisis management mechanism including the EFSF and ESM have also eased owing to the actions of the ECB and the on-going gradual economic recovery of the single currency area.
RATING SENSITIVITIES
The main factors that could lead to negative rating action, individually or collectively, are:
- Weaker public finances reducing confidence that public debt will peak in 2017 and be placed on a downward trajectory.
- Deterioration in competitiveness and weaker medium-term growth prospects.
Future developments that could individually or collectively, result in positive rating action include:
- Sustained lower budget deficits, leading to a track record of a decline in the public debt to GDP ratio from its peak.
- A stronger economic recovery of the French economy and greater confidence in medium-term growth prospects particularly if supported by the implementation of effective structural reforms.
KEY ASSUMPTIONS
In its debt sensitivity analysis, Fitch assumes a primary surplus averaging 0.5% of GDP over the next 10 years, trend real GDP growth averaging 1.5%, an average effective interest rate of 2.7% and GDP deflator of 1.5%. On the basis of these assumptions, the debt-to-GDP ratio would peak at 99.4% in 2017, before declining to 87.6% by 2023.
Fitch assumes the eurozone will avoid long-lasting deflation, such as that experienced by Japan from the 1990s. Fitch also assumes the gradual progress in deepening fiscal and financial integration at the eurozone level will continue; key macroeconomic imbalances within the currency union will be slowly unwound; and eurozone governments will tighten fiscal policy over the medium term.
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Merde.
France will be just fine -
Dick Bove
heheheheheheeh
I just want to give a shout-out to Egan-Jones for being a registered and certified CRA in Europe effective 12/12/14. Eighteen months in the dog house for a paper work violation.
Now get in there, get some revenge, and downgrade the entire continent.
\EJ/
I was just about to post something to the effect of: "fuck Fitch, has Egan-Jones been let out of detention yet?" And I now I see that they have. Goodie.
AAwwwww.
We downgraded some French folks.
Hint, we didn't raise some french folks.
You didn't write that!
Yep, merde from Pimp Daddy Uncle Sam. He's gotta keep his bitches in line, so every now and then he smacks one around.
When Pimp Daddy from Vichy DC says no boat sales to Russia, you don't just cancel the sale, you scuttle them thangs. Bitch ass Ho'llande needs to know her role.
It's a start. Whack BELGIUM next. That'll fix their fake front for UST purchases.
But But.... Socialism! How will I provide for myself if the government doesn't force other people to provide for me?
white power
"sacre bleu" mother fuckers...
HaHaHaHaHa!
Now they just need to downgrade U.S.A. to CCC ("Default imminent with little prospect for recovery"), but they probably don't want the S.E.C. to put them in prison for being honest.
http://en.wikipedia.org/wiki/Bond_credit_rating
Egan Jones could tell you all about that. Could.
Market open on Monday should be PRETTY interesting..
Bullish?
To whoever runs Fitch
stay away from Tall Buildings with open windows
France farts in Fitch's general direction, which happens to be France.
Better yet, France farts in Fitch's general direction, and Fitch catches a cold.
and metal fences...
Seriously?
Do these things even really matter anymore? Maybe us peons' credit ratings matter, but really?
What next, another credit event that ISN'T declared a credit event?
pods
To The Chalkboard
"I will not skip to the last page"
"I will not skip to the last page"
"I will not ...
1 - nationalisation - saisie de tout le secteur bancaire
2 - nationalisation de tout le secteur énergétique, pour organiser la sortie du nucléaire
3 - fermeture de la bourse, qui n'as jamais su démontrer son utilité sociale
4 - révocation de tous les traités depuis 2005 (suite à la forfaiture du référendum sur le TCE)
5 - sortie de l'OTAN, de l'Union Européenne
6 - révocation de l'assemblée nationale et du sénat, élection d'une assemblée constituante pour une 6ème république.
7 - f**k yeah !
1 - deja fait, pas eux qui dirigent, ca vient de plus haut.
2- arreteront le jour le où ils vont voir qu'il y a moins de fric à faire en renouvelable qu'en pur et dur type nucléaire /fossile ( quand le cout fera x5 le nucléaire on va y revenir. evidence...
4- tu reves, demandent pas notre avis deja en 2005, la suite ne se fait pas avec le peuple ni pour le peuple, la classe moyenne doit mourrir.
5- inenvisageable, de l'ordre du fantasmatique, les sanctions retours ferait exploser l'europe, l'idée même n'est pas évocable.
6 - instabilité sociale, plus d'état, plus de lois ? improbable, il y a une liste d'attente d'accession aux fonctions de haut niveau, tout est pré établi.
7- la masse ne bougera pas car larvée dans son confort, 70 ans sans guerre, si pour avoir 4000€ par mois on dit va tuer les belges et les allemends et les italiens, personne ne bougera.
----> vieux cons de grandes gueules d'européens.
J'espere que ton petit planning se fera ,comme ca toi et ton pays de merde vont enfin creuver rapidement. Ca , ce sera d utilitee sociale
So does that mean the whole eurozone gets downgraded?
we'll likely have to settle for watching draghi's jawbone move
No, not at all. It's great here. No problem.
that mean nothing. keep going.
Fuck France, NATO whores who should mind their own business, which isn't good obviously
And I just heard Gerard Derpadoo wrote a warm and loving note to P Krugieman that he was going long French debt and moving back to gay Parrie (that's Paris for you unintelecshual types).
And:
De Gaulle predicted the dollar crisis in 1965 and advocates the gold standardhttps://www.youtube.com/watch?v=eYgnGAr3-kM
"The fact that countries, as a matter of principle, accept dollars just as they would gold, for the settlement of the differences that exist to their profit in the USA balance of payments, in fact pushes the Americans toward borrowing, and borrowing for free, from foreigners, because what they owe them, they pay, or at least parts of it, with dollars they can print at will."
"March 10, 1966: After 31 assassination attempts against his life, Charles De Gaulle ordered France’s withdrawal from NATO’s military integrated command."
http://www.globalresearch.ca/the-lessons-of-history-in-1966-president-de...
This is one of the greatest adresses of all time.
De Gaulle had predicted it all.
I'm surprised that YouTube clip has never been featured on Zero Hedge.
De Gaulle send two frigate in NY telling to the freshly victorious US army: give me back our Gold or else...
Wish we have leader with balls like this today.
Meanwhile Nicolas Sarkozy (a French president with an Hungarian name) sold 600 metric tons back in 2007 thus collapsing our reserve to 2400 metric tons instead of 3000. Fucking traitor and he want to run for 2017 election !
BTFD idiots! (Buy The French Downgrade)
That's not a downgrade. They just gave Schauble another hint to agree with full blown ECB-QE,
"The Gathering"
Or forget about your golden wheelchair.
Merde alors!
Disobedient US rating agency downgrades US ---------> has problems with US government ( http://www.theguardian.com/world/richard-adams-blog/2011/aug/07/standard... )
Hollande has a friendly meeting with Putin ( http://www.sott.net/article/289949-The-Putin-Hollande-meeting-Why-was-Pu... ) -------> Obedient US rating agency downgrades France
Someone please get me off this fucking ride.
Ding-ding!
The WINNER !!!
You disobey us, we raise your borrowing costs.
Remember this one, M. Hollande:
http://www.reuters.com/article/2011/10/31/us-italy-berlusconi-idUSTRE79U48B20111031
“(Reuters) - Prime Minister Silvio Berlusconi faced fresh calls to resign on Monday as markets turned on Italy, pushing its borrowing costs to dangerous new levels”
Short French tulips.
Touché!
and today it hit an ATL low of 0.891%, they knew it was coming so they bid the crap out of it so any rise in yield will keep it still below 1% or does anyone really beleive it will open above 1%?
We will see Krugman and Drahgi talking about q1 in europe next week=)
Oh no my country downgraded... snif
Well with the president with a dutch name that can't have a budget who isn't in deficit, more busy to create and increase taxes, subsidizing the FSA and immigrant...
And on top of that can't deliver the two mistral because France is currently USA's (and Israel's) bitch.
We want EganJones
Does that stand for Arrogant Assholes? Just curious.
France was just warned by Germany, at the highest levels, to reign in their deficit spending over and above EU rules. But France says "fuck off"! There may be rules in the EU, but they need not be obeyed. So France will spend on to keep social peace, but that social peace is an illusion. The simmering Islamic time bomb now rests in every major French city, growing larger and more aggressive every year, most of them entirely dependent for money, housing, medical care, education and security upon the hated christian taxpayer majority of France. No need to ask the Muslim Youth roaming the streets below their high rise ghettos. They came to France for welfare, and to be pioneers in the Muslim and Islamic revival in Europe. Under their lies, they really do seek to take over and institute the Muslim faith, and natives will then be just like Palistinians in Israel. Economically the army of Muslim immigrants are a burden, socially, they are a cancer. Before they are finished, all the liberals who so championed their rights to be French, will be booted in their liberal faces by radical Muslim youth, for whom the destruction of Europe is their main aim. Of course liberals will lie and say that this is false, they are just nice liberal lovers of liberl society, and want all the best for France. Phucking idiots.
Nitwit Offspring of Nitwit Statists
Cultrually France is taken a tough line. UK and Belgium go Sharia first. Next will most likely be Spain (which the rags have a special attachment to for obvious reasons). They seem to be belatedly waking up to the existential threat to their societies - see recent populist parties in Germany, Scandinavia, Nederlands, etc.
However, they have already crossed the terminal line demographically. Muzz have 3-5 child replacements. Natives less than 1. The math is inescapable. Especially - as immigrants always do - they conjugate in metro areas - Paris, Rotterdam, London, etc. - thus magnifying that demographic strength even more into political power.
And this is IN ONE GENERATION. And it will not end well with everyone singing "Kumbaya".
Well the Free Mason, the Zionist, and the left progressive is FAR MORE dangerous than so called Muslim in my country, they've destroyed it since decade.
THE MOST ANTICHRISTIAN IS NOT THE MUSLIMS, IT'S THE GOVERNMENT AND SECRET SOCIETIES LIKE FREE MASON (IF NOT THE FRENCH THEMSELVES) WHO HATE CHRISTIANITY AND THE CHURCH.
FRANCE IS NOT CHRISTIAN COUNTRY ANYMORE BUT A FUCKING AMERICANIZED SECULAR SELF HATING COUNTRY.
(LIKE MANY COUNTRIES IN THE WEST).
So go back with your useless Muslim vs Christian rhetoric somewhere. This is neo-con thinking who want to import civil war in my country.
A French.
rant/
dup
If I was the Christian Frenchman I would be singing " I got Semites to the left of me (Muslims) and Semites to the right of me (Jews)...I'm stuck in the middle again...." There is a song that goes kind of like that lol.
If I were Germany, I'd just take France over. It'd be pretty easy, roll some tanks over the border and throw in some air support.... make things the way you want
Germany doesnt have money to support its people what makes you think it has the money to support the French.
Let's not forget Germany is a proxy for the USSA or is it the other way around? Whatever!
Witness how the central banks are now openly dictating elected government policy and so as many say on here WHY BOTHER VOTING?
Most of us on here know Goldman and JPM are the Clearing Houses for Western Governments. Why continue with the charade that the Sheeples have any representation?
The Policeman crashing the baton down on your skull is the ONLY thing maintaining bankster rule. This is coming to an end but unfortunately the cowardly politicians and uncivil servants will allow a few more million deaths.
SAD but WE will not forget this betrayal.
Its strange that there have been no assassination attempts on the sociopaths yet.
Funny [?] Where's all that prosperity that the EU promised!?!
Think Turkey isn't glad now for refusing entry with all the all emcompassing requirements and give-aways, paramount[?]tumultous for sovereignity... this jubilee per an[us]num... priviledge'd to join the exclusive occupiers club!
France is finnished! Germany is finnished[?]! but, can... grow a set! England is just the scum that caused all the shit, period! good riddance.
Think 'Balkan States', and since 1796/1800- 2008 how their 'State-of-Affairs' has them wishing that the old devil they knew was still in their bed,... rather than this new `Great`SATAN', is just too-over-the-TOP in BRIMSTONE and up their ass! OUCH!!!
CHAVEZ had it right, when he spoke of the smell of 'Sulfur"!
Just scan this rolling map of the Balkan Penninsula and say it ain't sew'd in with the finale just around the corner? http://en.wikipedia.org/wiki/File:Balkans_Animation_1800-2008.gif
use your imagination,...
jmo
Europe, not just France, is in big, big trouble...
http://www.globaldeflationnews.com/as-early-as-2011-ewis-analysis-warned...
Talk about kicking someone in the junk after they are beat down!
Step 1 The US/EU strong arm Bulgaria into shooting its foot off and working against their own national interest.
Step 2 Bulgaria loses 6000 direct jobs, access to gas, and transit fees in the half-billion per annum range. Bulgarian Energy Holding (BEH) also loses its 50% stake in South Stream Bulgaria, the company set up to operate the section of South Stream which was designed to pass via Bulgaria.
Step 3 S&P swoops in and downgrades their credit to junk.
Virtually all gas transit through Ukraine will come to an end in the near future, including the smaller pipeline through Ukraine and Romania to Bulgaria which currently transports gas, and Bulgaria will get socked in the 'nads again, paying a higher price for whatever is available for "reverse flow resale" by EU countries.
The best case scenario is that the hare-brained "Vertical Corridor" is built sometime in the next 15 years and for that privilege, they will get socked in the 'nads again, paying a much higher price for gas than what they would have if they asserted their sovereignty, like all the other South Stream countries.
Let's not worry Vlad will resurrect that DEAL in the future and on SIGNIFICANTLY better terms for the INCONVENIENCE.
I wonder who will break up first NATO or the EU or all together.
Oui Oui Fitch, va Fucka ton self ! et mange beaucou de merde ! cochon Facists
The Muslims are not Frenchies problem. Har. Your learning curve will come will come waaaaay too late. Frenchie pathetic in many ways. Perhaps you would take some of our members of the religion of peace.
I guess this means that France can sue Fitch now.
Europe on the Cabal's Menu
http://winteractionables.com/?p=17202