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Big Miss In French GDP Puts Further Pressure On Its AAA Rating According To Analysts
Earlier today, Europe's fulcrum economy - France - whose AAA rating is all the matters for continued European solvency, as a downgrade would effectively derail the EFSF even before its launch as Zero Hedge has discussed extensively in the past, reported Q2 GDP which not only missed consensus estimates of 0.3% growth, but plunged from Q1's 0.9% down to unchanged or 0.0% for Q2. The worry here is that, as Market Watch observes, "France’s economy, the second largest in the euro zone after Germany, recorded no growth in the second quarter, heightening concerns about the nation’s ability to achieve its deficit-reduction plan. The consumption expenditure of households slumped 0.7% in the second quarter, hurting GDP growth, INSEE said. Imports fell 0.9%, while exports were flat after growing 1.8% in the first quarter." And as those who have been following it know, the only reason why the rating agencies have not touched France's hallowed AAA-rating is due to their expectation that France will have no problem implementing a deficit-reduction plan which will then cut French debt. Alas, following this number which post revision could mean that France has re-entered a recession, concerns about the AAA rating, which is what set off this week's avalanche of fears about SocGen and all other French banks, are set to spike once again. “The flat outturn will not fit well with the current debate we are seeing around France and its ability to retain its triple-A credit rating,” said analysts at FxPro in a note. He was not alone to speculate about the linkage between GDP and rating: "today’s disappointing 2Q GDP data may well reignite" concerns about France’s ability to implement fiscal austerity necessary to maintain AAA rating, also said Daiwa’s Grant Lewis. In this market, which is desperately looking for things to be paranoid about, we expect that this could well become the next big meme, especially with all of Europe slowly rolling back into re-recession once again.
As for the French GDP, here is Goldman's full note on it:
French growth stagnates in Q2; details somewhat better than headline; EMEA-MAP: -25 (-5, 5)
Bottom line: While the headline figure was disappointing the demand details are somewhat more encouraging as investment spending held up well and the weakness was concentrated in private consumption.
Private consumption declined 0.7%qoq after +0.4%qoq. This is the first decline after an average increase of 0.3%qoq over the last 10 quarters. Rising energy costs are probably one factor behind the correction.
At the same time, gross fixed investment increased by a healthy 0.9%qoq after +1.2%qoq in Q1:2011. With investment spending usually being the most cyclical sensitive part of the demand side we view the continuing strength here as an indication that the underlying momentum is stronger than what the headline figure suggests.
The net trade contribution was positive (+0.3 percentage points), though this came on the back of stagnating exports and a decline in imports (-0.9%qoq). The stagnation in exports points to weaker external demand and this is certainly consistent with other data at hand, such as export expectations.
While we think that the underlying trend is somewhat stronger than the Q2 GDP data suggest, forward looking data, such as business surveys, point to a further slowdown during Q3.
After the Italian and French Q2 GDP figures, and based on our forecast for the other Euro-zone countries, we now expect Euro-zone Q2 GDP to be up 0.3%qoq - initially +0.4%qoq - after +0.8%qoq in Q1.
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"Is it safe?"
"NO! It's not safe! It's not my debt, and I'm not paying it!"
http://www.youtube.com/watch?v=dG5Qk-jB0D4
don t you worry. Sarko will meet Angie next week and everything will be a.ok, peachy.....
http://www.rankia.com/respuestas/896637/fotos/51970
Spread it all over the world...
End the AAA FARCE end Sarkozy end Eurozone
Amen Hugo, amen!
by looking at the european markets, i don't think they give a hoot!
US futes are up too. Apparently this is all bullish.
The authorities just can't shed their idée fixe that their economies will grow like it's 1999.
It ain't the 20th century no more. Devoting all available capital to shoring up zombie banks ensures that euro economies WON'T grow.
The Union of Soviet Socialist Republics went down in 1991. Looks like the union of euro-socialist republics will go down a Fibonacci 21 years later, in 2012.
Central planning don't work, goofballs!
Sure their bonds are "safe", that is if you dont mind getting paid back with more debt and arbitrary "voluntary" haircuts determined by the central planning liars. Just ask Greek bag/bondholders.
Of course the entire globe plunging back into a recession worse than the first is incredibly bullish for stocks, just ask any robot.
You were all begged to buy the dip!
A few more days like yesterday and I will buy this site.
@QuantTrader
I agree that the market for accurate reporting is underpriced, but truth is generally not for sale.
Could it be that the truth is finally becoming evident? Geez, if that could only happen in the US ponzi scheme.
Tell me again what we export... Oh Yeah, debt - I forgot.
We export financial inovation [ponzinomics] and War.
we export a munition tipped with a depleted sovereignty warhead...4-stage ICBM, bitchez! it's called the USD round here.
France AAA is a dead man walking. Inevitable from here.
As are most American's, 64% couldn't come up with $1000 for an emergency.
http://goldandsilverlinings.com/?p=1526
For everything else, there's MasterCard!
1929 redux. Wild swings, bankers (govt) stepping in to prop up markets .... all is well
suddenly Goldman starts to care about GDPs, debts, fiscal responsibility of UE members and world economy overall condition. yeah, right.. I think they try torpedoing EFSF smoke and mirrors and stop China from buing euro-bonds. cheap iPhones should flow into US and keep sheeple busy.
I remember when big GDP misses would move markets. Now, not so much.
Even with all this trouble, markets are fine and rising. No need for QE3.
BUT, growth was positive! Afterall, there must be a one somewhere to the right of that decimal! france should be rated AAAA!
Mr. Durden,
What the hell are you talking about...everything is cope-a-fuckin-stetic! French 10 year at 3%...what-chew talkin bout willis? Italy at 5%...we're sailin along swimmingly in the beautiful blue mediterranian!
GDP, contagion, derivative black-hole in soc gen and every other big-gallic clusterbanc...nothing but AAA+++ forever and ever, amen.
if i had the means to short eu sov bonds, well, bitchez...you'd be lookin at a bond shortin SOB just burstin at the seams with confidence, bestridin the world like a colassas on a coke-bender without a care in the world -- except gold, of course.
In Q1 French national debt rose from Eurobn 1591.2 to Eurobn 1646.1 - such a modest increase!
So this infusion of government inspired spending got France 0.0% in GDP for Q2. Nada.
Great economics, Great policymaking.
My bet is sometime next week we will see the downgrade.
S&P has to answer to Americans if they dont do their job.
French people know how to keep their money in their pockets, live simply ( but well) and stay away from debt. Unfortunately the same cannot be said of the French government, or French corporations. They are afflicted with the peculiar Gallic form of grandiosity that has always (historically) seen French society crumbling from the top down.
Je m'en merde avac les grand plans.
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