France not in best position over rating: debt agency
The head of the agency which manages France's government debt acknowledged that the country isn't in the best position compared with other eurozone countries with the top triple-A credit rating.
"I recognise that based on the criteria of public finances that France isn't in the best position compared to the other AAA countries in the eurozone, even if the responsiveness of the government has been welcomed by the (ratings) agencies and investors," Philippe Mills told the Les Echos in an interview to appear in Wednesday's edition.
The French government is fighting to defend the country's prized triple-A credit score but ratings agency Moody's has warned that higher borrowing costs, slowing growth and the eurozone crisis were putting it at risk.
Mills, head of the ATF agency, said those who believed that losing the top rating would not have serious consequences for France were seriously mistaken.
He pointed to Belgium, which has a rating one notch below the a triple-A, and which usually has to pay on the order of 0.12 percent more to borrow, which would translate into an additional cost of 2.5 billion euros per year for France.
He said exposure to Italian debt explained part of investors' concerns.
However Mills put a recent rise in the rate of return on French bonds in the secondary market in perspective, saying France was still able to finance itself at low rates.
France's average medium- and long-term borrowing rate for 2011 was 2.78 percent, he noted, "which is nearly a record since the introduction of the euro."
The average rate for the third and fourth quarters was likely to be close to 2.4 percent, he added.
The rate of return on France's benchmark 10-year bonds rose to 3.517 percent in trading on the secondary market on Tuesday.
© 2011 AFP