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Moody's Downgrades France, Blames "Political Constraints", Sees No Material Reduction In Debt Burden
Citing "continuing weakness in the medium-term growth outlook," Moody's has downgraded France:
- *FRANCE CUT TO Aa2 FROM Aa1 BY MOODY'S, OUTLOOK TO STABLE
Apearing to blame The EU's "institutional and political constraints," Moody's expects French growth to be at most 1.5% and does not expect the debt burden to be materially reduced this decade.
Moody's Investors Service has today downgraded France's government bond ratings by one notch to Aa2 from Aa1. The outlook on the ratings is stable.
The key interrelated drivers of today's action are:
1. The continuing weakness in France's medium-term growth outlook, which Moody's expects will extend through the remainder of this decade; and2. The challenges that low growth, coupled with institutional and political constraints, poses for the material reduction in the government's high debt burden over the remainder of this decade.
At the same time, France's credit worthiness remains extremely high, supporting an Aa2 rating. The country's significant strengths include: (i) a large, wealthy, and well-diversified economy with a high per capita income, (ii) favourable demographic trends as compared to other advanced economies, and (iii) a strong investor base and low financing costs. The rating and its stable outlook are also supported by the country's efforts to stabilise its public sector finances and initiatives recently deployed or announced to arrest the erosion of the economy's competitiveness.
In a related rating action, Moody's has today announced its decision to downgrade the ratings of the Société de Prise de Participation de l'État (SPPE) to Aa2 from Aa1. The SPPE's short-term rating was affirmed at P-1, including its euro-denominated commercial paper programme. The outlook on the ratings is stable. The debt instruments issued by the SPPE are backed by unconditional and irrevocable guarantees from the French government.
The local and foreign currency deposit ceilings and the local-currency and foreign-currency bond ceilings for France are unaffected by this rating action and remain at Aaa/P-1.
RATINGS RATIONALE
The main driver of Moody's decision to downgrade France's government bond rating to Aa2 is the increasing clarity, in Moody's view, that French economic growth will remain low over the medium term, and the obstacle that this will pose for any material reversal in France's elevated debt burden in the foreseeable future.
The current economic recovery in France has already proven to be significantly slower -- and Moody's believes that it will remain so -- compared with the recoveries observed over the past few decades. In part, this is due to the erosion of competitiveness and loss of growth potential following the global financial crisis. It is becoming increasingly clear, in the rating agency's view, that these problems will continue to constrain growth long after the cyclical recovery from the crisis is completed. In Moody's opinion, France's potential annual growth rate is at most 1.5% over the medium term. France faces material economic challenges, such as a high rate of structural unemployment, relatively weak corporate profit margins, and a loss of global export market share that have their roots in long-standing rigidities in its labour and product markets.
France entered the crisis with a legacy of sustained, very high levels of state expenditure and a history of recurring budget deficits that goes back four decades. A pattern that has become evident over time has been that French public sector debt, relative to GDP, essentially stabilises in good times and rises in bad. The rise in indebtedness since the onset of the crisis has been very rapid and the country's debt burden will likely peak and stabilise at around or close to 100% of GDP. Notwithstanding the magnitude of the fiscal and economic challenges that the government faces, the institutional response since the onset of the crisis has been slow and halting, essentially consisting of a series of small positive steps that have, individually and collectively, been insufficient to deal with these challenges in a timely manner. Within the context of Moody's sovereign rating methodology, a government's institutional willingness and ability to reverse the impact of shocks on the public finances is an important attribute associated with very high rating levels. While Moody's assessment of the quality of France's institutions remains very high, the rating agency does not believe that the country's institutional strength is on a par with many of the most highly rated sovereigns.
Taken together, low growth and institutional and political challenges to reforms make it unlikely that we will see a material reduction in the government's high debt burden over the rest of this decade, which means that it will remain well above the debt burdens of Aa1-rated peers. The combination of structurally weaker growth, low inflation, and a more than 30 percentage point increase in the debt/GDP ratio since the onset of the global financial crisis means that the shock absorption capacity of France's balance sheet has weakened and, in Moody's view, is no longer expected to recover materially in the next three to five years.
RATIONALE FOR STABLE OUTLOOK
The stable outlook on France's Aa2 sovereign rating partly reflects the strengths that underpin the Aa2 rating itself--the underlying economic and fiscal strengths of the French sovereign. France is a large, wealthy and well-diversified economy that is home to a significant number of companies in high-value added sectors. Income inequality is relatively low. Relative to other advanced economies, France has a favourable demographic profile, and is not expected to see a contraction in the size of its working age population over the long term. The government's current interest burden (both as a percentage of revenues and as a percentage of GDP) does not represent a significant constraint on the public finances. Efforts are being taken to reduce the budget deficit, albeit at a materially slower pace than was envisioned as recently as the 2014 Stability Programme.
The stable outlook also recognises the French government's stated desire to address some of the structural challenges to growth and the fiscal balance, which should at least protect its balance sheet from further deterioration. While the revealed preference of French institutions is to undertake incremental, gradual change, the changes we expect in these areas--for example, though a second Macron Law and a revision to the labour code--between now and national elections in 2017 should prevent a further material deterioration in French credit quality over this time horizon.
WHAT COULD MOVE THE RATING UP/DOWN
As reflected by the stable rating outlook, Moody's does not anticipate any movement in the rating over the next 12-18 months. However, downward pressure on the rating could arise if progress on structural macroeconomic reform were to fail to materialise as we expect. Moody's could also downgrade France's government debt rating further in the event of a reduced political commitment to fiscal consolidation or should we conclude that a material increase in debt was likely for any other reason.
Conversely, Moody's would consider changing the outlook on France's rating to positive, and ultimately upgrading the rating back to Aa1 in the event of much more rapid economic growth and debt-to-GDP reduction than Moody's is currently anticipating.
GDP per capita (PPP basis, US$): 40,375 (2014 Actual) (also known as Per Capita Income)
Real GDP growth (% change): 0.2% (2014 Actual) (also known as GDP Growth)
Inflation Rate (CPI, % change Dec/Dec): 0.1% (2014 Actual)
Gen. Gov. Financial Balance/GDP: -4% (2014 Actual) (also known as Fiscal Balance)
Current Account Balance/GDP: -0.9% (2014 Actual) (also known as External Balance)
External debt/GDP: [not available]
Level of economic development: Very High level of economic resilience
Default history: No default events (on bonds or loans) have been recorded since 1983.
On 15 September 2015, a rating committee was called to discuss the rating of the France, Government of. The main points raised during the discussion were: The issuer's economic fundamentals, including its economic strength, have materially decreased. The issuer's institutional strength/framework, have materially decreased. The issuer's fiscal or financial strength, including its debt profile, has materially decreased. An analysis of this issuer, relative to its peers, indicates that a repositioning of its rating would be appropriate.
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Sacrebleu! Les M-oo-dits!
Yes, it is true. Zee credit zucks vig time!
Disclosure: I'm long ink, paper and printers.
If moar' wars continue I might need to add razor wire and water cannons to that disclosure list.
Sacre Blew!
They needed the money!
Ohh....!
It's halal, this downgrade?
Downgrades are irrelevant when the downgraee has all the guns.
... kosher is closer to the truth
I FAaRT IN YOUR GENERAL DIRECTION!
Something smells... time to put up more razor wire! Man the water canons. And somebody go turn off the power to the Moody offices. That'l show em.
<< Something smells...."
Must be those Fem Fatale French arm pits. They still have not discovered Le Razor there.
keep in mind that French farm girls with hairy armpits can polish your knob most spectacularly. Keep in mind the French invented the French kiss, and the first to perfect oral sex.
if you change the country to USA, it still works
But seriously, this is sugar coatin' the hell out of the disaster that is the West's debt burden. Every NATO country's soveirgn debt should be rated F
All governments in the world deserve a junk rating.
maybe a range of ratings from crap through garbage to unfuckingbelieveable(which would be the Fed balance sheet)
It's 2006 all over again.
Everybody's shit stinks except ours.
LOL.
And the CFP's will follow blindly.
US cut to A-
<sarc> jeez don't be so cruel </sarc>
Couldn't possibly have anything to do with this now could it?!!!
Where is Moody's HQ'd again????
Shalom scumbag
Maybe France should drop some bombs somewhere.
You know, blow up some brownies.
The French economy seems to be based on setting and extinguishing fires set by "alienated" Muslims.
Say what you will, but that's a growth industry.
True dat....
je suis ... un fromage désabusé !!
Nothing about the Muslim no-go zones cutting into the product capacity of the survivors. Moody's must not read the news.
Anybody got a link so I can check on Sweden, Danmark, Norway, Finland, Estonia, Germany, Austria, hungry, Croatia?
I mean with immigrants and Refugees and limited State Budgets... there will be destruction, crime, higher insurance rates not just in France.
Maybe I can google it.
- 2012 Moody's affirms Sweden's Aaa/P-1 ratings and stable outlook 2012.
- Moody's Fired by Danish Banks as Investors Show Support ...
- Germany Retains Stable AAA S&P Outlook After Moody's Cut ...
- 2015 Moody's affirms Poland's A2/P-1 government bond ratings with ...
- Aug 20, 2014 ... Estonia's government bond rating of A1 (stable outlook) is supported by ...
- 2013 Moody's affirms Hungary's Ba1 government bond rating; outlook
- Jul 3, 2015 ... Moody's downgrades Lower Austria's ratings to Aa1; outlook
- Feb 1, 2013 ... Moody's downgrades Croatia's government bond rating to Ba1 from Baa3 ...
- 2014 Moody's changes outlook to stable on Italy's Baa2 government bond ...
- Moody's downgrades Greece's government bond rating to Caa3; on ...
-
https://vimeo.com/138863771
www.gatestoneinstitute.org/5195/sweden-rape
https://answers.yahoo.com/question/index?qid=20071221232108AAppsxu
www.frontpagemag.com/point/215141/somali-muslim-migrants-protest-welfare...
www.theguardian.com/commentisfree/2012/apr/23/british-empire-crimes-igno...
www.bloomberg.com/news/articles/2015-09-15/how-healthcare-gov-botched-60...
Actually, the French have downgraded themselves for many, many years now.
Favourable demographc trends? Like having 30% of those under 12 years old being genetically African and/or Muslim? Can we assume Moodys just love Somalia therefore?
lulz Moodys , S&P are sham better stop believing them
Goddamnit I hate soccer.
And the next person who says "American football" near me in a bar is getting their face punched.
American 'football' isn't football at all. In football you kick the ball. Fairly basic really.
Two African tribes crashing into each other with brute force is not football.
American Football is a STUPID game to play, but it IS fun to watch (I love NCAA, but the NFL feels like sitting in trial court).
The action in soccer is almost constant, whereas the average NFL game has approximately 11 minutes of actual action. I guess that's OK if you like commercials.
With the migrant problem there will be a new rating called "hopeless".
It's Always Sunni in Paris.
Hoisted by their own petard!
aka:
Skuttling their own Mistral.
France can stimulate growth by accepting all of the syrians. and iraqis....
Don't go in the open like that without your sarc tag, bro.
There you go -> \sarc
Instant housing demand
Instant food demand
Instant DEMAND! demand
I wonder if this has something to do with France going solo (without joining US coalition) against ISIS?
Still to high
Kissing USSA ass does not buy any favors for the French. Banksters do not want to jump over government hurdles for their quest of total control.
Are they not afraid of ending in jail?
The current economic recovery in France
Any more of the economic recovery around the world and there will be riots against bankers everywhere. Mass hysteria and a solidarity in the psyches of all humans. It will be a spontaneous arising that the world has never seen. Banksters should study psychology and the nature of the human mind. They know how to boil frogs but not humans. The process is unconscious and therefore nearly impossible to study adequately outside of history. Its not like it is a worldwide hatred against some other nation or people but this time it is focused on baners, banking families and those benefiting from the FRAUD--those committing criminal acts in exchange for money from bankers..
Apparently stinky cheese does not a good bribe make. Quelle surprise!
Nice call. Thanks.
Weekend Tylers rule.