Moody's Warns of French Credit Downgrade
France's heavy financial backing of troubled eurozone economies may come at a cost to its pristine credit rating, according to a report released this week by Moody's Investors Service.
The New York-based ratings firm reported Tuesday it may issue a negative outlook for Europe's second-largest economy within the next three months if the cost of providing financial assistance to other eurozone markets destabilizes its budget. Such an outlook would place France's AAA credit rating at risk.
"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 reported, according to the International Business Times.
Bob McKee, chief economist at Independent Strategy in London, asserted that France is a key factor in the progress of the region's debt crisis.
"If France loses its AAA status, that in turn increases the pressure on Germany," he told Bloomberg.
However, Richard Gilhooly, U.S. director of interest-rate strategy at TD Securities, pointed out in an interview with The Wall Street Journal that the same process unfolded a year ago, "except the potential downgrades have shifted from Italy and Spain to France."
