Tags: moodys | france | rating

Moody's Monitors France's Rating Outlook

Monday, 17 Oct 2011 06:26 PM

 

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Moody's warned Monday it may slap a negative outlook on France's Aaa credit rating in the next three months if the country fails to make progress on crucial fiscal and economic reforms.

Moody's also will take into account any potential adverse developments in financial markets or in the economy in assessing the outlook, it said, noting that the government has now less room to stretch its finances than it did during the financial crisis of 2008.

A negative outlook would be a sign that Moody's could downgrade France in the next couple of years.

"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 said in a statement.

The warning comes as European Union leaders discuss measures to protect the region's financial system from an expected Greek debt default. Those measures should include injection of capital into banks with exposure to Greek debt.

France may face a number of challenges in the coming months, such as the need to provide additional support to other European countries or to its own banking system, Moody's said.

For France to maintain a stable outlook on its rating, it will need to prove its "continued commitment to implementing the necessary economic and fiscal reform measures," the ratings agency said.

The government will also have to show "visible progress in achieving the targeted sustainability improvements" in its debt ratios, Moody's said.

France's debt metrics are now among the weakest of its Aaa peers, the agency said.

© 2014 Thomson/Reuters. All rights reserved.

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