Bloomberg News

Sarkozy Says Loss of AAA Wouldn’t Be ‘Insurmountable’

December 12, 2011

(Adds Magnus comments from third paragraph.)

Dec. 12 (Bloomberg) -- President Nicolas Sarkozy said that the loss of France’s top credit rating wouldn’t be an “insurmountable” economic difficulty, according to an interview published in Le Monde newspaper.

If the rating companies “pull it, we’ll face the situation coolly and calmly,” Sarkozy was quoted as saying by the newspaper. “It would be an additional difficulty but it’s not insurmountable. What is important is the credibility of our economic policy and our strategy of reducing spending.”

Moody’s Investors Service said today it will review the ratings of all European Union countries after a summit last week Brussels failed to produce “decisive policy measures” to end the region’s debt turmoil. Standard & Poor’s placed the ratings of 15 euro nations, including AAA rated France and Germany, on review for possible downgrade on Dec. 5 pending an assessment of the summit.

George Magnus, senior economic adviser at UBS AG, said he expects one of Europe’s AAA rated countries to lose its top rating. “It’s inevitable,” Magnus said in a interview with Maryam Nemazee on Bloomberg Television in London today. “It’s just a question of when S&P or the other rating agencies decide to pull the trigger.”

Of the five euro zone countries with the top debt rating, France may be the most vulnerable. Its 10-year notes traded at 3.30 percent at 1:55 p.m. in Paris, higher than the other four, and 121 basis points above similarly dated German debt.

Credit-default swaps on France climbed 13 basis points to 222 basis points today, while those on Germany rose half a point to 99.5 basis points.

Avoiding a ‘Depression’

In the Le Monde interview, Sarkozy said that actions announced by the European Central Bank last week to support banks will help keep credit flowing and avoid a “depression.” The ECB plan should also help ease tensions in sovereign debt markets, Sarkozy said.

“I’m confident that the ECB, in the future, will set the right strength of intervention,” he said.

Sarkozy said “not a cent” of state support will be needed by French banks.

--Editors: James Hertling, Eddie Buckle

To contact the reporters on this story: Mark Deen in Paris at markdeen@bloomberg.net; Gregory Viscusi in Paris at gviscusi@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


Best LBO Ever
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus