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Fitch Revises French Outlook To Negative
We spoke to soon: it appears suicide is painless after all, as Fitch just changed the French outlook to negative.The punchline: "The Negative Outlook indicates a slightly greater than 50% chance of a downgrade over a two-year horizon." As for the line that will finally shut up France in its diplomatic spat with the UK: "Relative to other 'AAA' Euro Area Member States, France is in Fitch's judgement the most exposed to a further intensification of the crisis." And now, the market shifts its attention to non-French rating agencies, who will downgrade France in a "slightly" shorter timeframe... more like 2 hours according to some rumors.
FITCH AFFIRMS FRANCE AT 'AAA'; OUTLOOK REVISED TO NEGATIVE
Fitch Ratings-London/Paris-16 December 2011: Fitch Ratings has today affirmed France's Long-term foreign and local currency Issuer Default Ratings (IDRs) as well as its senior debt at 'AAA'. Fitch has also simultaneously affirmed France's Country Ceiling at 'AAA' and the Short-term foreign currency rating at 'F1+'. The rating Outlook on the Long-term rating is revised to Negative from Stable.
The affirmation of France's 'AAA' status is underpinned by its wealthy and diversified economy, effective political, civil and social institutions and its financing flexibility reflecting its status as a large benchmark euro area sovereign issuer. In addition, the French government has adopted several measures to strengthen the creditability of its fiscal consolidation effort.
Nonetheless, government debt to GDP is currently projected by Fitch under its baseline scenario to peak in 2014 at around 92%, higher than any other 'AAA'-rated sovereign with the exception of the UK and US and significantly higher than other 'AAA'-rated Euro Area peers.
France's sovereign credit profile benefits from a broad and stable tax base - the volatility of the revenue to GDP ratio is half the 'AAA' median - and the interest service burden is moderate and broadly comparable with other 'AAA's.
Under Fitch's baseline scenario that does not incorporate the realisation of substantial fiscal liabilities arising from the Eurozone crisis or other adverse shocks, even such an elevated level of government indebtedness is consistent with France retaining its 'AAA' status assuming that government debt is firmly placed on a downward path from 2013-14. The Negative Outlook on the French rating reflects Fitch's view that the likelihood of the realisation of contingent liabilities, although still not our base-case assumption, has materially increased, as has the risk of a much worse than expected economic and consequently fiscal outturn.
Similar to other highly rated peers, France faces medium and long-term challenges to improve the functioning of the labour market and enhance international competitiveness. Fitch recognises that the authorities have adopted measures to address these weaknesses, though a more radical structural reform agenda would underpin greater confidence in the underlying potential growth rate of the French economy. However, corporate and especially household indebtedness is moderate compared to some 'AAA' peers, notably the UK and US, while foreign indebtedness remains modest, albeit rising.
The Negative Outlook is prompted by the heightened risk of contingent liabilities to the French state arising from the worsening economic and financial situation across the Eurozone, as reflected in the Rating Watch Negative placed on the sovereign ratings of several Euro Area Member States (EAMS) on 16 December 2011. As Fitch commented in its report on 23 November, 'French Public Finances', the fiscal space to absorb further adverse shocks without undermining its 'AAA' status has largely been exhausted.
The intensification of the Eurozone crisis since July constitutes a significant negative shock to the region and to France's economy and the stability of its financial sector. Since May, when Fitch last affirmed France's 'AAA' status, its forecast for economic growth in 2012 has been cut from 2.1% to 0.7% with around one-in-four chance of outright contraction. Despite the additional fiscal measures announced in August and November equivalent to around 1% of GDP, further measures are likely to be required in order to cut the deficit to 3% of GDP by 2013 and stabilise government debt below 90% of GDP in light of the worsening economic and financial outlook.
In Fitch's opinion, the commitments made by leaders at the EU Summit on 9-10 December and by the ECB were not sufficient to put in place a fully credible financial firewall to prevent a self-fulfilling liquidity and even solvency crisis for some non-AAA euro area sovereigns. In the absence of a 'comprehensive solution', the Eurozone crisis will persist and likely be punctuated by episodes of severe financial market volatility.
Relative to other 'AAA' Euro Area Member States, France is in Fitch's judgement the most exposed to a further intensification of the crisis. It has a larger structural budget deficit and higher government debt burden relative to Euro Area 'AAA' peers. Moreover, relative to non-Euro Area 'AAA' peers, notably the US ('AAA'/Negative Outlook) and the UK ('AAA'/Stable Outlook), the risk from contingent liabilities from an intensification of the Eurozone crisis is greater in light of its commitments to the European Financial Stability Facility (EFSF) and the European Stability Mechanism (ESM), as well as indirectly from French banks that are less strong than previously assessed as reflected in recent negative rating actions by Fitch.
The Negative Outlook indicates a slightly greater than 50% chance of a downgrade over a two-year horizon. The triggers that would likely prompt a rating downgrade are as follows:
- Increased likelihood that contingent liabilities from an intensification of the Eurozone crisis will be crystallised onto the French state balance sheet.
- Material slippage from the fiscal targets that the government has set itself, notably the aim of stabilising the government debt to GDP ratio from 2013 and placing it on a firm downward path towards levels that would increase the 'fiscal space' necessary to absorb adverse shocks.
- Weaker than expected economic performance that prompts a re-assessment of France's medium to long-term growth potential.
Conversely, economic and fiscal performance in line with Fitch's baseline expectations, as set out in the Special Report, French Public Finances (23 November 2011), along with the resolution of the Eurozone crisis would likely result in the stabilisation of the rating Outlook.
In the absence of a material adverse shock, most likely associated with dramatic worsening of the Eurozone crisis, Fitch would not expect to resolve the Negative Outlook until 2013.
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Did somebody flush?
Does anyone besides me think the market is about to take a big fat dump?
Those frogs swirling around the bowl need to concentrate on swimming , and spend less time mouthing off about the British.
And this just in: Insolvent beggar europe on it's knees pleads the world to bail it out:
http://www.prisonplanet.com/out-of-chaos-order-now-imf-seeks-collective-...
Time to go long on kneepad manufacturers!
I think...just look at the last hours of India index today...something similar is coming to an indice near u...i think definitely before tuesday....better to hold on to those shorts..u never know when the dump comes
Not just India, all the indexes took a shit at the close. In Europe, just about the right time they got their 12 hour warning from S&P leaked out. Hold onto those shorts for the after hours dump and heading into the close.
Nah, Santa wants the market to rally.
Cutting the branch you're sitting on....
http://www.youtube.com/watch?v=lkd1V5k7Xss
Mr. Market thinks this is good news.
Simply reflecting the obvious is all..
What about UK? lol
i do not want to wait two years! i want it now!
downgrade of france this w/e or xmas...this is bs, France has no reason to be at par with germany.
Are you kidding Falak? They make better cars (HANDS DOWN, give me a spirited Citroen or Peugeot any day), planes, food AND wine.
How can you say that? Ehhhh?
ori
/this-that-and-the-4th-reich/
Yes, well, life is not all shoot-shoot, bang-bang, you know
they are no longer lean and hungry; but the french have resilience. This is a financial break down of world capitalism. So all have to fall, then reset. Humble pie all around ORI. No exceptions. And its the innocent who bleed most.
Just compare France and Germany's trade balances; eloquent, and yearly budget deficits...same story.
Mr. Market didn't see that shit. He was doing lines off his desk again and feels AMPED baby. lets make some money.
S&P or Moody's will do what Frentch doesn't have the guts to do.
C-c-cut F-F-France.
Oh Mr. Sarkos.
Anyhow Bove saying 150k bank layoffs for next year. Wow.
Counting down to zero.
ZIRP4EVA
I guess it would not do to mention a France downgrade in the same paragraph with Slovenia.
Those riffraff.
LOL!
What will be the harbinger, French 10 year bond at 6% +?
Say it Frenchie, chowdah!
This is bullish in the sense that Shadenfreude is at an all-time high.
And soon we can expect the turn: when the race to the bottom morphs to self-downgrades and people become jealous of their own Shadenfreude
France cds trade > 200, which is where a TON of BBB rated countries trade. Anything less than a downgrade to BBB will trigger a rally in risk assets/Euro. The odds of a French downgrade of more than 2 notches are astronomically small.
Flash: Slovenia rating turns positive on the strength of Slovenian Comedians with the world's best jokes about the crisis
It's a broke world after all
First, their wines are slapped down by the latest out of China.
Now, Fitch comes along and gives their debt instruments a Neg...
How bad can things get?
Yields dropping on bad Gyro news. Looks like ECB is asking Eurobanks to buy sovereign debt.
Fitch Hints at Italy and Spain Downgrade, Euro Drops, But Yields Drop Too!
http://confoundedinterest.wordpress.com
Hmmmm.
This revelation seems to have bounced of of our Teflon market.
WTF?
Lump o coal from Santa.
Actually, these days coal is desirable
Make that buffalo chips
Buffalo chips work just as well as coal.
Santa's going to likely downgrade to Groupon specials.
what is interesting now is to see HF now openly shorting sovereigns in Euro zone, no more CDS, pure shorts! Its open war!
Here's David Einhorn's Shockingly Simple Europe Play http://www.businessinsider.com/david-einhorn-europe-play-2011-12
interesting day, so i am watching treSURIES GO UP, TLT SHOULD BE AT THE POINT for it to top out again. I saw the vanguard europe drop, and was watching the markets. it's kinda normal for treasuries to go opposite the market on friday (tlt) never under stood this. But now the action makes a bit of sense. also I figured the open gap should come down back to baseline again. I much prefer this than the crazy insane ramp from a big open gap and all the way up all day. it makes no sense and that's what happened last friday. this is much better because you know ;ast friday didn't make any sense.
Seattle Area High School Students Walk Out Of Class To Protest Education Cuts
http://www.huffingtonpost.com/2011/12/16/seattle-area-high-school-_n_115...
Happy Holidays
The French will go down with a triple A rating just like AIG did.
Yeah, funny how that works.
Has the Chinese ratings agency downgraded them all yet?
Down grade equals +5 point in the S&P 500???
Nooooo of course this market is efficient
For sale: French army rifle.
Very stylish. Good condition.
Never fired. Dropped twice.
Right, so if Greece starts moaning non stop for a week their downgrade will be revised upwards, to AAA+
Then everyone else does the same whinging and the recesson will be over, everyone will be a smiley AAA+ again.
As Inspector Clouseau would say: There is a time to laugh and a time not to laugh, and this is not one of them.
I'm so sick of this yo-yo bullshit and rumor/news driven market.
If the algobots were suddenly disconnected, the bids would disappear and I bet the S&P would crash 100-300 points in less than 5 minutes.
You're assuming there's still humans with equities left to sell.
Then again, I'd expect the DTCC to announce that all customer accounts have been rehypothecated and there are simply no shares left to trade.
Fitch downgrades Fitch. S&P, Moody's outlook: ambiguous.
Rating agencies should include the risk of downgrade by other rating agencies in their own outlook.
Full circle death spiral people.. Wall Street fast money games applied to Soverein States and their economy.
I real life, we all know that we need time to make things happen. not anymore.
Does it really matter? All large AAA country have at best BB grade (see explanation of gradings from MJS below).
BB - Speculative credit quality. Capacity for timely fulfillment of financial obligations vulnerable to adverse changes in internal or external circumstances. Financial and/or non-financial factors do not provide significant safeguard and the possibility of investment risk may develop.
B - Significant credit risk. Capacity for timely fulfillment of financial obligations very vulnerable to adverse changes in internal or external circumstances. Financial and/or non-financial factors provide weak protection; high probability for investment risk exists.
C - Substantial credit risk is apparent and the likelihood of default is high. Considerable uncertainty as to timely repayment of financial obligations. Credit is of poor standing with financial and/or non-financial factors providing little protection.
And all that on the short time scale (2 years) at best. For time frame over 5 years all large AAA countries are SD (selective default) at best.
It does matter to market psychology. That's the only thing keeping this turd up. I'm looking for the markets to selloff into the close once this rumor goes mainstream. I've been saying all along that Friday night was the night they do the deed. Softens the blow for the weekend. Buy the Inverse ETF's now for a quick flip after hours or on Monday.
L0L!!!
oh! the humanity! the gavel has fallen!
1 year's double secret negative outlook probation, BiCheZ!!!
You da man, Slewie. Strike a match!
Interesting, is this the back door bail out of the EU?
“The CB will print when they see signs of deflation.... The FED will print if the dollar gets stronger because they need the dollar to be weaker.
Some (US) legislation authorized a $100 billion line of credit from the United States to the IMF. It suddenly occurred to me how this actually works. The IMF puts in the borrowing notice for the $100 billion and the Treasury sends the $100 billion to the IMF. They (the IMF) then use it to bail out Europe.
But here’s what happens, the Treasury sends the money and the SDR gives the Treasury a note because it’s a borrowing. So that’s very significant because for the first time in history the IMF would be leveraging its balance sheet. But the note they give the Treasury is not denominated in dollars, it’s denominated in SDR’s.
The SDR includes dollars, but it also includes other things such as Swiss francs, pounds sterling, euros, Japanese Yen and eventually the Yuan. Now when the note matures, the IMF pays you back in the dollar equivalent of the SDR at that time. In other words, they don’t give you $100 billion back. They take the SDR equivalent back and convert it into dollars at whatever the exchange rate is at the time.
What that means is that the Treasury is going short dollars.... My question is, if the Treasury is shorting the dollar, shouldn’t the rest of us be shorting the dollar too?”
Jim Rickards, KWN
Upshot, don't be deterred from buying PMs because much printing is still in the cards.
Another '50% chance of'...matching my bet that I have a definite 50% chance of shagging Reese Witherspoon before New Years Day.
If your women dont shave thier pits and your men dont use deoderant then more than likely there is something amiss in your country.
The real question is, who's head is used for football at the beautiful Palace of Versi?
After lurking in all other sites such as ZH (Seeking Alpha, Market Watch, Business Insider, Azizonomics etc) I conclude that a lot of disaffected (The lost their savings gambling the markets) people are venting their spleen on these sites, but still have no idea.
Because the market is now centrally planned by the BIS and its Henchmen, the Central Banks, it is impossible to use history as a guide, and charts for that matter. The top houses and traders have read all the books, most new traders have, and as a result they (and their algos) know how to shake out Retail, and even wholesale traders.
Most of the bears are probably paid shills to strike fear in peoples hearts, forcing them to liquidate their underwater holdings.
People forget that money equals a commodity to exchange it for. With all this liquidity and money printing, the dollars will be winding up in the hands of people who are snapping up hard commodities, before the owners realise that the money is devalued.
For this reason I have gone to Cash (To buy items at deflated desperate prices) and prime farmland (to earn income from people who have to eat). In Australia you can only own guns if you have a farm or member of a sporting shooter association. I bet eventually the sporting shooters will lose their right, but farmers will have a genuine reason (Stock shootings, vermin shootings and pest control) IF the SHTFH (Hard-causing a fine gut wrenching spray) at least I know I will be able to defend my interests. (My great Grandfather and Great Grandmother on both sides were burned alive in their home in Ukraine WW2 and I am learning from history)
BTW I have contacts in Australian Real Estate, in prime areas of Melbourne, and the market has dropped 40% in price offers but vendors are not selling. Once they are forced to sell (unemployment or panic), they will be underwater big time. In Australia, we have full recourse loans, so consumer spending is going to take a dive. Short Australian Banks and Retail. Australian Banks have heavily relied on offshore financing of Mortgages, and their funding costs are huge. I used to work in the Big 4 banks and their IT systems are inadequate for them to report quickly and efficiently.
it's a mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad, mad world.
Well, the British tax payers are needed, that is for sure. The City of London is the only place capable of hyper-rehypothecation into infinity. Where else will they get trillions to borrow from Peter to pay Paul's debt to Peter?
The Federal debt PLUS GSE debt (F&F, FLUB) is over $16 trillion. We are WORSE than Greece.
http://confoundedinterest.wordpress.com