14 FEBRUARY 2012

MOODY's announced  nine sovereign debt ratings adjustments, eight in the Euro area and the UK, including France's Triple A with a negative outlook, « as anticipated in November 2011 » according to the Credit Rating Agency (CRA) due to a lack of decisive political action within the single currency region in resolving the debt crisis and insufficient financial bail-out fund resources , in the Agency's own words due to « institutional reform of its fiscal and economic framework and over the resources made available to deal with the crisis ».

The CRA's decision about France's rating adjustment stems from the fragile Euro area economic environment and steam yet needed to boost the region's competitive edge which exposes France further to potential shocks due to :
+ the country's ongoing public debt deterioration
+ government slow pace in initiating debt reduction reforms despite efforts made since 2008
+ weight of the public debt if the country's fiscal consolidation program was to fail  (which the CRA notes may occur  if added contribution to bail-out a Euro area member or its own banking system were to be required « a material increase in exposure to contingent liabilities in the Euro area were to intensify). 

The CRA also readjusted  two state agencies, banks lenders, respective Triple A credit rating with a negative outlook in conjunction with the country's own, Société Française de Financement de l'Economie Française (SFEF) and Société de Prise de Participation de l'Etat (SPPE). At the G20 last November , a total 29 banks were designated as systemic, and including  four A-list French banks -- BNP Paribas, SOC GEN, CA GROUP and Banque Populaire Group. 

On November 21st, when the CRA had pronounced its first Triple A warning to France, 10-year T-Bills had jumped to 3.55%, the stock exchange index, CAC 40, had plunged -4.41% dragged down by financials and 5-year Credit Default Swaps (CDS or insurance against default) had soared to 221.615 against 181.20 on November 8th. Today's index, ahead of the US stock exchange opening, was in the black above 3300 points by mid-day and 10-year T-Bills stood at 2.95%.  VIX, the www.cnbc.com volatility index was at a low 19.04.      

The CRA's  other sovereign rating adjustments today include Austria (outlook on Aaa rating changed to negative), Italy (downgraded to A3 from A2, negative outlook), Spain (downgraded to A3 from A1, negative outlook) Malta ( downgraded to A3 from A2, negative outlook), Portugal (downgraded to Ba3 from Ba2, negative outlook), Slovakia (downgraded to A2 from A1, negative outlook), Slovenia(downgraded to A2 from A1, negative outlook). The UK 's outlook on Aaa rating was also changed to negative.