France is heading for a credit rating downgrade from all-important AAA-status warns Fitch Ratinggs.
Just like the U.S. and most major developed nations, the country’s debt-to-GDP ratio has exploded and is expected to hit 90% by 2011. realise that Japan lost AAA-status in the past by just breaking 80%. Thus France, and the U.S., could be pushing its luck already.
Telegraph: Mr Coulton [of Fitch Ratings] said the surprise “mauvais élève” has been France, which has let its budget deficit balloon to 8.5pc of GDP next year – or higher including an off balance sheet “Grand Loan” of €35bn (£31bn) for investment projects – despite having suffered a mild recession. “It is one thing to run a large deficit when your economy has shrunk sharply, but this is self-inflicted. They are moving close to double digits. It is a concern,” he said.
Luckily the solution is far easier than one would expect. Just jawbone.
France must articulate credible fiscal consolidation programmes over the coming year, given the budgetary challenges they face in stabilising public debt. Failure to do so will greatly intensify pressure on their sovereign ratings,” it said.
The funny thing, is that when every developed nation risks losing AAA-status, then it all becomes far more excusable on a relative basis. Thus the more other nations push their debt limits, more politically palatable it becomes for the U.S. to do so as well.