Moody's Announces That France's Debt Metrics Have Deteriorated And Are Now The Weakest Of All Aaa-Rated Peers

Tyler Durden's picture

This is not what Europe needed, 6 days ahead of the G20 ultimatum's expiration for Europe to somehow fix itself, and hours after Deutsche Bank said the rating agencies may go ahead and put France on downgrade review. Just out "Moody's notes that the government's financial strength has weakened, as it has for other euro area sovereigns, because the global financial and economic crisis has led to a deterioration in French government debt metrics -- which are now among the weakest of France's Aaa peers." As for the timing... "Over the next three months, Moody's will monitor and assess the stable outlook in terms of the government's progress in implementing these measures, while taking into account any potential adverse economic or financial market developments."

Full note:

Moody's issues annual credit report on France
 
Frankfurt am Main, October 17, 2011 -- In its annual credit report on France, Moody's Investors Service says that the country's Aaa rating with a stable outlook reflects the French economy's strength, the robustness of its institutions and very high government financial strength.
 
The rating agency's report is an update to the markets and does not constitute a rating action.
 
France's sustainable GDP growth has been supported by the economy's large size, high productivity, broad diversification and its track record for innovation, together with high private sector savings and an only moderate built-up of household and corporate liabilities. In Moody's opinion, these features provide ample capacity to absorb shocks -- as demonstrated by the resilience of domestic demand during the global crisis -- although some risk factors (such as the weak prospects for global growth) continue to constrain medium-term economic performance.
 
However, Moody's notes that the government's financial strength has weakened, as it has for other euro area sovereigns, because the global financial and economic crisis has led to a deterioration in French government debt metrics -- which are now among the weakest of France's Aaa peers. Moody's nevertheless continues to deem France's financial strength to be very high, particularly when compared with debt affordability (interest burden in relation to government revenues) which remains comfortable. But very high debt finance-ability in an uncertain financial and economic environment, which is a crucial feature of Aaa governments, rests on investors' confidence in the government's ability and in its willingness to tackle unforeseen challenges. France may face a number of challenges in the coming months -- for example, the possible need to provide additional support to other European sovereigns or to its own banking system, which could give rise to significant new (contingent) liabilities for the government's balance sheet.
 
The deterioration in debt metrics and the potential for further contingent liabilities to emerge are exerting pressure on the stable outlook of the government's Aaa debt rating. Moody's notes that the French government now has less room for manoeuvre in terms if stretching its balance sheet than it had in 2008. France's continued commitment to implementing the necessary economic and fiscal reform measures as well as visible progress in achieving the targeted sustainability improvements will be important for the stable outlook to be maintained. Over the next three months, Moody's will monitor and assess the stable outlook in terms of the government's progress in implementing these measures, while taking into account any potential adverse economic or financial market developments.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
d00daa's picture

BEAR MARKET BITCHEZ

Cassandra Syndrome's picture

We fart in your general direction bitchez!

SGS's picture

No shit parle vous? Almost as stupid as making two bears saying that silver is in a free market.

www.silvergoldsilver.com

Hard1's picture

France is also the only AAA country with a BB credit spread.  Where should france spread be on the following table: 

FRANCE 5 yr 184   Aaa/AAA

Indonesia 5 yr  203   Ba1/BB+

Peru 5 yr   161, Colombia 161  Baa3/BBB

Mexico 5 yr  154  Baa1/BBB

Chile  5yr  125  AA-

 

Excusez mois chiennes  (sorry bitchez!)

 

 

markmotive's picture

I smell another bailout.

And yet again, it is the middle class taxpayer and saver that is left holding the bag. Folks, this is eventually going to lead to WWIII if this continues.

http://seekingalpha.com/article/299891-the-eu-rescue-bid-what-does-it-me...

tiger7905's picture

Don Coxe Update - he did a report for the upcoming G20 meeting.

 

http://goldandsilverlinings.com/?p=1695

 

 

Max Hunter's picture

nahh... EUR/USD should be at 1.40 by the end of the week..

Zero Govt's picture

I hear Moody's repeating verbatim Reggie Middletons research ...'only' a year behind his more explicit and detailed warnings but remarkably for a CRA, weeks ahead of the carnage!

Maybe there was a major fuk-up in Moody's PR Dept and they pre-released their dull downgrade before the pre-selected time of their usual behind the curve (collapse) and absolutely worthless announcements?

CRA : Crap Rated 'A'

macholatte's picture

6 days ahead of the G20 ultimatum's expiration

 

What ultimatum?

What they said was "get it done before the next meeting". There were no consequences if they didn't.

Or did I miss something?

 

covert's picture

old news, this has been known for a VERY long time now. europe has been deeply impoverished for a long time now.

http://expose2.wordpress.com

 

Ruffcut's picture

THe ratings agencies need to change to ASS instead of AAa ect.

THen ASS negative turns better than ASS positive.

That has been my highest rating for all the banks for years now.

I deem it to be quite special for countries to now be cla assified in the ASS system.

tekhneek's picture

You sir, you there, you are ahead of your time.

That is all.

I can just see Samuel L. Now: "I'm tired of these muthafuckin' rating agencies, downgradin' mah muthafuckin credit rating!"

Or maybe even get some Kanye in here: "France, I'm happy for you, and I'mma let you finish, but America should have one of the worst credit ratings of all time."

Abe handled that though: http://uberhumor.com/wp-content/uploads/2011/05/dnt7z.jpg

Ruffcut's picture

Thank you, sir, but no. I'm only trying to keep ahead (myhead) beyond the ASS system.

PicassoInActions's picture

Can some1 tell me , what is the most correlated curency to S&P or DOW?

ANd, as for the France... well Sarcozy will cry all rating agencies are sux.

 

 

Ctrl-Alt-Defeat's picture

FAF - I would plus 1 this all day.

slaughterer's picture

S&P will soon follow with the chop to AA.  Sarko's FrAAAnce just became FRAANCE.    Time to dial in the French sovvereign debt CDSs on 10x leveraqge.  And say goodbye to ESFS Sarko.   Your banks are going down.    

knukles's picture

Then pretty soon we'll all have trouble pronouncing FrBBBnce.
Rhyme with Provance?

A Man without Qualities's picture

Here's the rub - Sarko is trying to charm Merkel into allowing the EFSF to become a bank, that will issue bonds, place with ECB and inject equity into French banks.  It's a crazy and desperate idea, but the French ponzi, which has been growing since the era of de Gaulle, is about to reach the endgame.

The web of debt and deceit that exists between the French state, local governments, state owned businesses and banks cannot be resolved....

Tuffmug's picture

.... but it can be extended. Sarko's scheme is pure money printing to save the ponzi and is the only thing that the market will accept next week  as the "solution" to the "crisis". 

reader2010's picture

Infinite QE for all.

kaiserhoff's picture

Pardon my French, but when you are dead on arrival, how do you weaken?

SemperFord's picture

Because your illness becomes airborne and spreads to others ;)

Josh Randall's picture

Debt Metrics sounds like a cool name for a college Alt-Rock Band

Mutatto's picture

They'd all be un-employed recent graduates with an assfull of student loans...

 

Overflow-admin's picture

Sounds very Rage Against The Machine

Bay of Pigs's picture

Okay, who put the hot potato back into the microwave? 

 

GottaBKiddn's picture

Not to worry, Christine LaGarde, their beloved finance minister is now heading the IMF>

fourchan's picture

and the imf only deals in gold. funny how that works, its too good for america but not them, we get the funny money.

mynhair's picture

Zandi approve this message?

knukles's picture

Phillipe:  Raymon, vous smell terreeeble!
Raymon: Pour cumquat Phillipe?
P:  Vous must washie en la lavatoreee to removeier les smellies our we get doen graddeeed
R:  Mai Phillipe, les services Gran Pigees will down gradddee us eff wee smell.
P: But zee ratting ess for financials.
R:  Oui Phillipe.  Les financelles, zey smell.
P:  Ah, so we wash zee financials like zee Greeks han all be Hokay?
R:  Oui!
P&R:  Lavez, lavez, lavez!

JW n FL's picture

 

 

http://www.imf.org/external/np/tre/activity/2011/101311.htm#tab4

Table 4. Status of Multilateral Debt Relief Initiative Assistance <--- France will be on this list with the rest of Europe in 4.. 3.. 2..

Current Financial Arrangements (GRA, PRG)   Term Definition Arrangements IMF credit is made available under a variety of borrowing arrangements with different disbursement schedules and maturities depending on the balance of payment needs of the member. GRA   Stand-By Arrangements The most common type of credit arrangement designed to provide short-term financial assistance. Purchases under Stand-By Arrangements are repayable in 8 quarterly installments 3¼ - 5 years after disbursement. Extended Arrangements Extended Arrangements provide credit for a longer period since these arrangements usually require fundamental reforms which may need more time to put in place and take effect. Drawings under extended arrangements are repayable in 12 semiannual installments 4½ - 10 years after disbursement. Flexible Credit Line The Flexible Credit Line (FCL) has been established to allow members with very strong track records to access IMF resources based on pre-set qualification criteria to deal with all types of balance of payments problems. The FCL could be used both on a precautionary (crisis prevention) and nonprecautionary (crisis resolution) basis. Members may request either a one-year arrangement with no interim reviews, or a two-year arrangement with an interim review of qualification required after twelve months. Upon expiration, the Fund may approve additional FCL arrangements for the member. Access is determined based on individual country financing needs and is not subject to a pre-set cap. Purchases under FCL arrangements are repayable in 8 quarterly installments 3¼ - 5 years after disbursement. Precautionary Credit Line The Precautionary Credit Line (PCL) has been established to provide effective crisis prevention to members with sound fundamentals, policies, and institutional policy frameworks that have no actual balance of payments need at the time of approval of the PCL, but moderate vulnerabilities that would not meet the FCL’s qualification standard. Members may request an arrangement with duration of between one and two years. Access under an arrangement with one-year duration shall not exceed 500 percent of quota, with the entire amount being made available upon approval of such arrangement and remaining available throughout the arrangement period subject to an interim six-monthly review. Access under an arrangement with a duration of more than one year shall not exceed 1000 percent of quota, with an initial amount not in excess of 500 percent being made available upon approval of the arrangement and the remaining amount being made available at the beginning of the second year of the arrangement subject to completion of the relevant six-monthly review. Purchases under PCL arrangements are repayable in 8 quarterly installments 3¼ - 5 years after disbursement. PRG Trust   ECF Arrangements Concessional arrangements providing credit in support of a three-year macroeconomic and structural adjustment program to eligible low-income members facing protracted balance of payment issues (formerly known as PRGF). The loans are repayable in 10 equal semiannual installments 5½ - 10 years after disbursement. ESF Arrangements Concessional arrangements ranging from one to two years to provide financial assistance to low-income countries that are experiencing exogenous shocks but do not have an ECF arrangement in place. The repayment terms are identical to ECF arrangements. SCF Arrangements Concessional arrangements ranging from one to two years to provide financial assistance to low-income countries that are experiencing short-term but not protracted balance of payments needs. The loans are repayable in 9 equal semiannual installments 4 - 8 years after disbursement.   Interest on all PRGT loans (including outright drawings under the RCF) has been waived through end-December 2011. Arrangement Details IMF financial arrangements are reviewed regularly to assess progress in policy reforms. The disbursement of funds under an arrangement is linked to the achievement of certain financial targets.
carbonmutant's picture

Hey, not to worry LaGarde says, "...the IMF has adequate resources," She didn't actually say what for though...

kaiserhoff's picture

Buying Santorini in the bankruptcy sale?

carbonmutant's picture

Does she have enough money to bailout Dexia or just the French banks...?

kaiserhoff's picture

Maybe she could borrow a few bucks from the FDIC..., oh wait.

carbonmutant's picture

PIIGS exposure
Banca MPS (Italy) - $290.98 billion
Banco Popular Español (Spain) 183 Billion
Intesa Sanpaolo Group (Italy) $607.03 billion
BBVA (Spain)  $552.90 billion
Unicredit (Italy) $541.54 billion
Banco Santander (Spain) $567.20 billion
Deutsche Bank (Germany): $354 billion

Of course the real issue is exposure as % of Common Equity:
Allied Irish Banks (Ireland) 33,352%
Banca MPS (Italy)  4,666%
Banco Popular Español  1,927%
Intesa Sanpaolo Group (Italy) 1,638%
BBVA (Spain) 1,566%
Unicredit (Italy) 1,070%
Banco Santander (Spain) 953%

It'll be interesting to see how Christine deals with loaves and fishes...

hambone's picture

I'm in Bavaria this week and will have a blow off dinner tomorrow night w/ all my German counterparts...can't wait to hear if any have woken up to what is going on, especially if Germany is about to be left propping all of EU on it's lonesome...up til now, none had really seriously considered or questioned their govs actions.  Can't wait to see if anything has changed?

Village Smithy's picture

Please report back upon your return.

buzzsaw99's picture

Q: what is red and green and spins at 50 mph?

Mark123's picture

The big guys are going to trash the markets until Germany agrees to squander its hard-earned capital to save the system (i.e. transfer any and all remaining wealth to banking cartel).

 

Wouldn't you just love to throw Sarkozy through a chipper?

navy62802's picture

Patience, my friends, patience. It'll all be over soon.