France's AAA rating justified unless crisis worsens: Fitch

23rd November 2011, Comments 0 comments

Credit ratings agency Fitch said Wednesday that France's top AAA rating was justified but could be under threat if the eurozone debt crisis worsens.

"France's 'AAA' rating would be at risk" if a further intensification of the eurozone crisis resulted in a much sharper economic downturn in France and across the region, obliging Paris to bail out its banks, Fitch said.

Fitch said France's recent adoption of austerity measures "has enhanced the credibility of the government's consolidation programme."

However, additional measures are still likely to be necessary "if the 3.0 percent of GDP deficit target is to be achieved by 2013, with Fitch projecting the deficit in 2013 to be around 4.0 percent of GDP."

At the same time, Fitch, one of the top three ratings agencies, said "France's 'AAA' status continues to be underpinned by a high-value added and diverse economy, broad and stable tax base and its commitment to deficit reduction and stabilising, and eventually reducing, public debt.

"The principal concern with respect to France is that the intensification of the eurozone crisis will generate contingent liabilities that will be crystallised onto the sovereign balance sheet," Fitch warned.

If gross government debt surpassed 95 percent of Gross Domestic Product, France would have little room to absorb further shocks such as having to bail out its banks exposed to other eurozone states' debts, Fitch said.

"Fitch does not currently expect the French banks to require or to receive capital injections from the state at this juncture," the agency noted.

© 2011 AFP

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