It’s not just the United States that suffers from the threat of a credit ratings downgrade. France does, too.
Fitch Ratings said it’s watching closely French plans for a “special national bond” to raise up to 80 billion euros ($112 billion) for projects beyond the normal budget, the London Telegraph reported.
Fitch said it has no immediate plans to lower France’s pristine AAA rating. But a downgrade remains a possibility, if the government doesn’t return to fiscal discipline in the next year.
“Money is fungible,” Brian Coulton, head of sovereign ratings for Europe at Fitch, told the Telegraph.
“The question is whether this is a substitute for other spending that they were going to do anyway. Although France has been less exposed to the financial crisis than Britain or the U.S., it started with a higher debt level, so it has less headroom.”
Just as in the United States, “finances are getting stretched to a significant degree,” he said.
“We expect to see announcements of stronger consolidation in all the main AAA countries in 2010, including France,” he said.
The country plans to use the bond money for technology research, green energy, and railways.
In the United States, talk emerged of a downgrade several weeks ago. But experts are skeptical.
“I don’t think the rating will be downgraded. The real chances of a credit default are minimal,”
Douglas Holtz-Eakin, an economist who was a top advisor to Sen. John McCain, told Moneynews.
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