No reason to downgrade France rating: bank chief

18th November 2011, Comments 0 comments

The head of the Institute of International Finance, a top lobby group for the banking industry, said Friday he sees no reason for France to lose its top credit rating despite eurozone debt crisis pressure.

France "is not Germany (but is) ... not in a terribly bad shape," IIF managing director Charles Dallara said at a banking conference in Frankfurt.

Paris is doing a "good job to tackle fiscal challenges ... (and) there is no case to be made for downgrading France," Dallara said, referring to recent speculation the country could lose its top AAA credit rating due to a slowing economy and increasing pressure on its public finances.

That pressure has shown up as France has had to pay higher rates to raise fresh funds on the debt markets and as investors have put their money into safe-haven German, rather than French bonds, widening the spread between the two to record levels.

As a result, France now has to pay twice as much as Germany to get fresh funds.

France is among six eurozone nations led by powerhouse Germany which still retain the prized AAA rating but the credit ratings agencies have voiced concern about its position.

Moody's warned in October of a possible downgrade unless action is taken to stabilise French finances.

Dallara is currently leading negotiations with Greece on a major debt rollover which will see the banks take a 50 percent loss on their holdings of Greek government bonds if it goes through.

© 2011 AFP

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