Copyright 2012 FranceNewsEconomy.com

16 JANUARY 2012

High street stores were packed with Winter sales bargain hunters on Saturday following Standard and Poor's (S&P) Friday 13th decision to lower by one notch the country's AAA long-term sovereign credit rating to AA+,  with a negative outlook. Ten-year Treasury Bills were 3.06% on Friday and 5-year Credit Default Swaps (CDS) rated 219.245 points www.cnbc.com from 227 in mid-December.  New structural measures will be announced  at the end of this month as specified by Prime Minister François FILLON.

The Credit Rating Agency's (CRA) communication includes  a « one-in-three chance that rating will be lowered in 2012 or 2013 » additional warning. In December, Fitch had headlined « EFSF Debt ‘AAA' Rating Depends on France remaining ‘AAA' » adding that the European bail-out fund's debt issues may be at risk « if a larger guarantor like France or Germany were downgraded »   due to their major contribution to the fund.

Rather than being fully assertive, S&P renders its long-term rating opinion conditional to future government action to reduce the public debt so as to avoid a potential «  net general government debt » inflation that could « surpass 100% of GDP » against the current 80%. The Credit Rating Agency's (CRA) opinion  acknowledges the country's strength « its wealthy diversified and resilient economy and its highly skilled and productive labor force » but unequivocally puts pressure on Euro area leaders to swiftly resolve  the single currency‘s lingering debt realities, as it stands doubtful about December 9th agreement (the Fiscal Compact or accrued legislative and constitutional budget surveillance)which « has not produced a breakthrough of sufficient size and scope to fully address the eurozone's financial problems« .

Inversely, S&P acknowledges the European Central Bank's (ECB) liquidity operations into preventing an accrued credit crunch and the domino effect of such restraints on the real economy. Regarding the single currency's future, the CRA's indirectly suggests that its demise is unlikely based on 35-year span data which demonstrate that « the 15-year cumulative default rate for sovereigns rated in investment grade was 1.02%, and 0.00% for sovereigns rated in the 'A' category or higher.« 

 Nine Euro area countries long-term sovereigns were downgraded on Friday equally to France (  Austria, Belgium, Cyprus, Estonia, Finland, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovenia, and Spain) with a negative outlook.  The outlooks on the long-term ratings on Germany and Slovakia are stable. In « due course », S&P specified that details of government-related entities, financial institutions, insurance companies, public finance, and structured finance sectors impacted by the triple A downgrade will be released.