France's Unsolicited Long-Term Ratings Lowered To 'AA+'; Outlook Negative
|Publication date: 13-Jan-2012 16:38:19 EST|
- Standard & Poor's is lowering its unsolicited long-term sovereign credit rating on the Republic of France to 'AA+'. At the same time, we are affirming our unsolicited short-term sovereign credit rating on France at 'A-1+'.
- The downgrade reflects our opinion of the impact of deepening political, financial, and monetary problems within the eurozone, with which France is closely integrated.
- The outlook on the long-term rating is negative.
FRANKFURT (Standard & Poor's) Jan. 13, 2012--Standard & Poor's Ratings Services said today that it lowered the unsolicited long-term sovereign credit rating on the Republic of France to 'AA+' from 'AAA'. At the same time, we affirmed the unsolicited short-term sovereign credit rating at 'A-1+'. We also removed the ratings from CreditWatch with negative implications, where they were placed on Dec. 5, 2011. The outlook on the long-term rating is negative. Our transfer and convertibility (T&C) assessment for France, as for all European Economic and Monetary Union (eurozone) members, is 'AAA', reflecting Standard & Poor's view that the likelihood of the European Central Bank restricting nonsovereign access to foreign currency needed for debt service is extremely low. This reflects the full and open access to foreign currency that holders of euro currently enjoy and which we expect to remain the case in the foreseeable future. The downgrade reflects our opinion of the impact of deepening political, financial, and monetary problems within the eurozone. The outcomes from the EU summit on Dec. 9, 2011, and subsequent statements from policymakers lead us to believe that the agreement reached has not produced a breakthrough of sufficient size and scope to fully address the eurozone's financial problems. In our opinion, the political agreement does not supply sufficient additional resources or operational flexibility to bolster European rescue operations, or extend enough support for those eurozone sovereigns subjected to heightened market pressures. We also believe that the agreement is predicated on only a partial recognition of the source of the crisis: that the current financial turmoil stems primarily from fiscal profligacy at the periphery of the eurozone. In our view, however, the financial problems facing the eurozone are as much a consequence of rising external imbalances and divergences in competitiveness between the eurozone's core and the so-called "periphery." As such, we believe that a reform process based on a pillar of fiscal austerity alone risks becoming self-defeating, as domestic demand falls in line with consumers' rising concerns about job security and disposable incomes, eroding national tax revenues. Accordingly, in line with our published sovereign criteria, we have adjusted downward the political score we assign to France (see "Sovereign Government Rating Methodology And Assumptions," published on June 30, 2011). This is a reflection of our view that the effectiveness, stability, and predictability of European policymaking and political institutions (with which France is closely integrated) have not been as strong as we believe are called for by the severity of what we see as a broadening and deepening financial crisis in the eurozone. France's ratings continue to reflect our view of its wealthy, diversified, and resilient economy and its highly skilled and productive labor force. Partially offsetting these strengths, in our view, are France's relatively high general government debt, as well as its labor market rigidities. We note the government is addressing these issues through, respectively, its budgetary consolidation strategy and structural reforms. The outlook on the long-term rating on France is negative, indicating that we believe that there is at least a one-in-three chance that we could lower the rating further in 2012 or 2013 if:
- Its public finances deviated from the planned budgetary consolidation path. Budgetary measures announced by the French government to date may be insufficient to meet deficit targets in 2012 and 2013, should France's underlying economic growth in these years fall below the government's current forecast of 1% and 2%, respectively. If France's general government deficit were to remain close to current levels, leading to a gradual increase in the net general government debt to surpass 100% of GDP (from just above 80% currently), or if economic growth were to remain weak for an extended period, it could lead to a one-notch downgrade.
- Heightened financing and economic risks in the eurozone were to lead to a significant increase in contingent liabilities, or to a material worsening of external financing conditions.
Conversely, the ratings could stabilize at current levels if the authorities are successful in further reducing the general government deficit in order to stabilize the public debt ratio in the next two to three years and in implementing reforms to support economic growth. RELATED CRITERIA AND RESEARCH All articles listed below are available on RatingsDirect on the Global Credit Portal.
- Sovereign Government Rating Methodology And Assumptions, June 30, 2011
- Criteria For Determining Transfer And Convertibility Assessments, May 18, 2009
- Standard & Poor's Puts Ratings On Eurozone Sovereigns On CreditWatch With Negative Implications, Dec. 5, 2011
- Trade Imbalances In The Eurozone Distort Growth For Both Creditors And Debtors, Says Report, Dec. 1, 2011
- Who Will Solve The Debt Crisis?, Nov. 10, 2011
TELECONFERENCE INFORMATION Standard & Poor's will hold a teleconference on Saturday Jan. 14, 2012 at 3:00 PM UK time. The teleconference can be accessed live or via replay and by phone or audio internet streaming The call will begin promptly at 3:00 p.m. TELECONFERENCE DETAILS Passcode: 2705831 For security reasons, the passcode will be required to join the call. DIAL IN NUMBERS: Country Toll Numbers Freephone/Toll Free Number AUSTRIA 43-1-92-80-003 0800-677-861 BELGIUM 32-1-150-0312 0800-4-9471 DENMARK 45-7014-0239 8088-2100 ESTONIA 800-011-1121 FINLAND 106-33-149 0800-1-12771 FRANCE 33-1-70-75-25-35 080-563-9909 GERMANY 49-69-2222-3198 0800-101-6627 GREECE 30-80-1-100-0674 00800-12-6609 IRELAND 353-1-247-5274 1800-992-870 ITALY 39-02-3601-0953 800-985-849 LUXEMBOURG 352-27-000-1351 8002-9058 NETHERLANDS 31-20-718-8530 0800-023-4392 PORTUGAL 8008-12439 SLOVAK REPUBLIC 421-2-322-422-16 SPAIN 34-91-414-40-78 800-098-194 UNITED KINGDOM 44-20-7950-6551 0800-279-3590 USA 1-210-795-1143 866-297-1588 TELECONFERENCE REPLAY INFORMATION: Call notes: This call is to be recorded for Instant Replay purposes UK TOLL #: +44-20-7108-6279 UK TOLL FREE #: 0800-376-9027 The instant replay will start at: Jan. 14, 2012 5:30pm UKT The instant replay will end at: Feb-14-2012 11:59pm UKT Passcode for replay: 7498 Restrictions may exist when accessing freephone/toll free numbers using a mobile telephone. AUDIO STREAMING AND AUDIO REPLAY INFORMATION: To join the event: URL: https://e-meetings.verizonbusiness.com Conference number: 1297498 Passcode: 2705831 To access the Audio Replay of this call, all parties can: 1. Go to the URL listed above. 2. Choose Audio Streaming under Join Events. 3. Enter the conference number and passcode. (Note that if this is a recurring event, multiple dates may be listed.) Replays are available for 30 days after the live event.
This unsolicited rating(s) was initiated by Standard & Poor's. It may be based solely on publicly available information and may or may not involve the participation of the issuer. Standard & Poor's has used information from sources believed to be reliable based on standards established in our Credit Ratings Information and Data Policy but does not guarantee the accuracy, adequacy, or completeness of any information used.
Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column. Alternatively, call one of the following Standard & Poor's numbers: Client Support Europe (44) 20-7176-7176; London Press Office (44) 20-7176-3605; Paris (33) 1-4420-6708; Frankfurt (49) 69-33-999-225; Stockholm (46) 8-440-5914; or Moscow 7 (495) 783-4009.
|Primary Credit Analysts:||Moritz Kraemer, Frankfurt (49) 69-33-99-9249;|
|Frank Gill, London (44) 20-7176-7129;|
|Additional Contact:||Sovereign Ratings;|
No content (including ratings, credit-related analyses and data, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of S&P. The Content shall not be used for any unlawful or unauthorized purposes. S&P, its affiliates, and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions, regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of the Content even if advised of the possibility of such damages.
Credit-related analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities or to make any investment decisions. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P’s opinions and analyses do not address the suitability of any security. S&P does not act as a fiduciary or an investment advisor. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives.
S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process.
S&P may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.standardandpoors.com (free of charge), and www.ratingsdirect.com and www.globalcreditportal.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.standardandpoors.com/usratingsfees.
Any Passwords/user IDs issued by S&P to users are single user-dedicated and may ONLY be used by the individual to whom they have been assigned. No sharing of passwords/user IDs and no simultaneous access via the same password/user ID is permitted. To reprint, translate, or use the data or information other than as provided herein, contact Client Services, 55 Water Street, New York, NY 10041; (1) 212-438-7280 or by e-mail to: firstname.lastname@example.org.