Photo: Wikimedia Commons
Market freakout on European sovereign debt downgrades is so 2011, says an S&P Europe economist.While there’s been much speculation about the ratings agency downgraded France losing its AAA credit rating, Jean-Michel Six told Reuters the markets were “already treating France as a BBB country.”
Besides, Six added, a downgrade and higher borrowing costs are not always correlated. When S&P downgraded the U.S., its interest rate actually dropped, he said.
“Being downgraded is a bit like moving to 19 from 20 out of 20 in high school,” the Paris-based Six said. “It doesn’t mean you are gong to flunk your [exam],” he said.
In a separate interview with a Paris daily, Six said a downgrade would be aimed less at France and more at the Eurozone in general.
Still, a ratings hit would likely linger over President Nicolas Sarkozy’s head as he faces reelection this spring.
France’s interest rate on French 10-year notes rose to 3.29 per cent this morning, up from 3.18.