Tags: France | French downgrade | Britain | David Cameron

Analysts: French Downgrade Would Punish Europe

Friday, 16 Dec 2011 11:37 AM

Standard & Poor's has threatened to downgrade France, stripping the country of its AAA rating, and if it does, all of Europe will suffer, says Philippe Waechter, Head of Economic Research, Natixis Asset Management.

"It's a real issue for markets and for investors to see that change in rating," Waechter tells CNBC.

The problem, experts say, is that France guarantees emergency assistance funds, and stripping France of its top-notch credit ups the risk perception tied to such funds, which makes it more expensive for them to raise money.

Still, Waechter says, France shouldn't focus too much on protecting its rating, such as by cutting spending, as it should on expanding its overall output.

"The most important thing is growth rather than the triple-A rating," Waechter adds. "We have to think about how to handle the risk of a drop in economic growth. If we can manage that, we can manage our rating."

The crisis has put France at odds with the U.K., with Paris upset at London's refusal to go along with a pact calling for great fiscal coordination among all E.U. nations.

Britain said the deal would require it to slap taxes on financial transactions such as stock trades, which Prime Minister David Cameron said he could not accept.

Bank of France Governor Christian Noyer has said downgrading France would be "unjustified concerning the economic fundamentals."

"Or else they should start by downgrading the United Kingdom, which has higher deficits, as much debt, more inflation, and less growth than we do, and whose credit is collapsing," Noyer was quoted by the daily Le Telegramme as saying, according to the Associated Press.

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Standard Poor's has threatened to downgrade France, stripping the country of its AAA rating, and if it does, all of Europe will suffer, says Philippe Waechter, Head of Economic Research, Natixis Asset Management. It's a real issue for markets and for investors to see that...
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Friday, 16 Dec 2011 11:37 AM
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