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Fitch Pours A-98 Gasoline On The European Fire, Threatens AAA Rating Of Parent France

Tyler Durden's picture




 

It just goes from bad to surreal in Europe where the latest moment of pure Greek "gods kill titans" tragicomedy, comes from French rating agency Fitch threatening to cut... France? Excerpts via Bloomberg:

  • FITCH: FRANCE CAN'T ABSORB MORE SHOCKS WITHOUT UNDERMINING AAA
  • FITCH: FRENCH AAA WOULD BE AT RISK IF CRISIS INTENSIFIES
  • FITCH: ADDED MEASURES LIKELY NEEDED FOR FRANCE '13 DEFICIT GOAL
  • FITCH PROJECTS FRANCE DEFICIT IN '13 ABOUT 4% OF GDP

Some more:

"Similar to the situation of other major ‘AAA’ sovereigns, the increase in government debt has largely exhausted the fiscal space to absorb further adverse shocks without undermining their ’AAA’ status. The principal concern with respect to France is that the intensification of the eurozone crisis will generate contingent liabilities that will be crystallised onto the sovereign balance sheet."

More on the report:

Fitch Ratings-London-23 November 2011: Fitch Ratings has published a Special Report on French Public Finances, examining the implications for the government deficit and debt, and France's sovereign credit profile, of weaker economic growth and the potential contingent liabilities arising from the intensification of the eurozone crisis.

According to Fitch, the recent adoption of new fiscal measures by the French government has enhanced the credibility of the government's consolidation program. However, additional measures are still likely to be necessary if the 3% of GDP deficit target is to be achieved by 2013, with Fitch projecting the deficit in 2013 to be around 4% of GDP. In Fitch's baseline scenario, the debt to GDP ratio will peak at 91.7% in 2014, in line with projected peak debt levels for France's main 'AAA' peers and consistent with France retaining its 'AAA' status.

France's 'AAA' status continues to be underpinned by a high-value added and diverse economy, broad and stable tax base and its commitment to deficit reduction and stabilising, and eventually reducing, public debt. Its structural budget deficit is smaller than that of the UK ('AAA') and US ('AAA') and general government debt is expected to peak at around 90% of GDP, which is similar to the level forecast for the UK and less than the projection of 105% for the US.

Similar to the situation of other major 'AAA' sovereigns, the increase in government debt has largely exhausted the fiscal space to absorb further adverse shocks without undermining their 'AAA' status. The principal concern with respect to France is that the intensification of the eurozone crisis will generate contingent liabilities that will be crystallised onto the sovereign balance sheet.

Today's report suggests that were France's EUR158.5bn guarantee commitment to the EFSF ('AAA') to be fully utilised - not Fitch's current base-case scenario - gross government debt would surpass 95% of GDP, placing it at the higher end of the range that Fitch judges would be consistent with France retaining its 'AAA' status. This would leave the sovereign balance sheet with little room to absorb further shocks, such as having to fund capital injections into domestic banks, unless there were significant off-setting measures that would quickly reduce public debt to levels consistent with its 'AAA' rating. Fitch does not currently expect the French banks to require or to receive capital injections from the state at this juncture.

Under a stress scenario whereby a further intensification of the eurozone crisis resulted in a much sharper economic downturn in France and across the region, and a material increase in the risk of contingent liabilities being crystallised, especially with respect to financial support for the banking sector, France's 'AAA' rating would be at risk.

 

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Wed, 11/23/2011 - 08:33 | 1906119 youngman
youngman's picture

All of those statements have already happened...so why no downgrade...

Wed, 11/23/2011 - 08:42 | 1906139 Popo
Popo's picture

There's still a chance for that $1B wire to hit the Fitch executives' accounts at CS.

Wed, 11/23/2011 - 08:41 | 1906140 slaughterer
slaughterer's picture

No France downgrade from Fitch (a relief), just gives Sarko incentive to bulldoze Merkel and Draghi tomorrow into full-out monetization. 

Wed, 11/23/2011 - 08:51 | 1906168 Sudden Debt
Sudden Debt's picture

Because in the script it says: Januari => downgrade month for France.

 

Wed, 11/23/2011 - 10:04 | 1906427 knukles
knukles's picture

I love Paris in the spring time,
I love Nipples in the fall,

But I love FrAAnce most of all

Wed, 11/23/2011 - 08:33 | 1906120 transaccountin
transaccountin's picture

we are fked. buy silver

Wed, 11/23/2011 - 08:39 | 1906137 end da fed
end da fed's picture

“Total F@%king Chaos”- The Irishman

Wed, 11/23/2011 - 09:15 | 1906245 Non Passaran
Non Passaran's picture

Because you're short silver?

Wed, 11/23/2011 - 08:34 | 1906121 Global Hunter
Global Hunter's picture

Downgrade France before or after they downgrade Germany?

Wed, 11/23/2011 - 08:34 | 1906122 EscapeKey
EscapeKey's picture

We need to clamp down on the freedom of press. This wouldn't even be an issue if we lived in a fascist dictatorship.

Wed, 11/23/2011 - 09:15 | 1906244 magpie
magpie's picture

Then the bonds will be dropped from helicopters...oops.

Wed, 11/23/2011 - 08:41 | 1906128 Temporalist
Temporalist's picture

Le PEW!

 

And across the channel:

 

BoE: UK at greatest risk since Lehman Brothers

The UK is at its greatest risk of a financial collapse since Lehman Brothers, according to a survey by the Bank of England (BoE).

http://www.ftadviser.com/2011/11/23/investments/economic-indicators/boe-...

 

Pound Weakens Versus Dollar as BOE Minutes Signal More Stimulus

"The pound fell to a six-week low against the dollar after minutes of the most recent Bank of England’s policy meeting showed some officials said an increase in stimulus may be needed."

http://www.businessweek.com/news/2011-11-23/pound-weakens-versus-dollar-...

 

Happy Debasement Day turkeys!

Wed, 11/23/2011 - 08:39 | 1906130 GeneMarchbanks
Wed, 11/23/2011 - 08:38 | 1906132 firstdivision
firstdivision's picture

Did Goldman finally "close" their Euro position?

Fitch won't downgrade France, this is all empty threats.

Wed, 11/23/2011 - 08:40 | 1906138 GeneMarchbanks
GeneMarchbanks's picture

Nope. Stolper has doubled down.

Wed, 11/23/2011 - 08:42 | 1906142 magpie
magpie's picture

After the failure this morning someone has to introduce additional "distinction" into the bond market.

Wed, 11/23/2011 - 08:46 | 1906154 Stax Edwards
Stax Edwards's picture

Jeez, its like they are actually trying to ruin Christmas.  I am starting to lose some faith that we will get our Santa Rally.  

We have four weeks starting Monday to make it happen, lets get all the EZ dirt shaken loose this week.

Wed, 11/23/2011 - 08:47 | 1906156 in-Credible Banker
in-Credible Banker's picture

Can we just have the blow up now and get it over with?  I am sick of reading this stuff everyday - reminds me of this!

 

http://www.youtube.com/watch?v=aUyh2yaZPno

 

 

Wed, 11/23/2011 - 08:51 | 1906167 midgetrannyporn
midgetrannyporn's picture

France may soon have a worse Fitch credit rating than a $15k/year migrant strawberry picker. LMAO!

Wed, 11/23/2011 - 08:59 | 1906176 Sudden Debt
Sudden Debt's picture

Just helped my boss buy 160K in euro's in Silver this morning.

Somehow I hope he get's smoked... but than I would also get smoked...

But hey! He did his part to join the silver bug club!!

The weird part was that he ordered it all in a way like I order a cup of coffee! And than it was like "what's next on the agenda"... I felt like such a poor smuck....

HOLLY SPROT I SAY!

Wed, 11/23/2011 - 09:26 | 1906267 theMAXILOPEZpsycho
theMAXILOPEZpsycho's picture

he did it all today??

you didnt tell him about that little thing called dollar cost averaging??!!

I think we`re going back into the 20s for a while!

Wed, 11/23/2011 - 09:09 | 1906222 evolutionx
evolutionx's picture

THERE WILL BE NO DOUBLE DIP…

No, there will be no double dip. It will be a lot worse. The world economy will soon go into an accelerated and precipitous decline which will make the 2007 to early 2009 downturn seem like a walk in the park.

 

http://www.mmnews.de/index.php/english-news/6230-there-will-be-no-double-dip

Wed, 11/23/2011 - 09:11 | 1906234 Korbin Dallas
Korbin Dallas's picture

"Let us eat ze gateau!"

Wed, 11/23/2011 - 09:13 | 1906239 Don Diego
Don Diego's picture

Vivement Marine 2012!

Wed, 11/23/2011 - 09:21 | 1906246 Coldfire
Coldfire's picture

The excrescent triumph of that Chris Lagarde IMF'er dude. Congratulations, Chris. Your mother would be proud. Ah, The glory that was France's credit rating. Je me souviens!

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