The ratings agency Fitch announced today that it France's current Triple-A finance rating is likely to remain in place although it downgraded its outlook on that nation to "negative" from "stable." As the Wall Street Journal reports, the news for other European nations was grim.
...Fitch also placed its ratings on six other euro-zone nations, including Spain and Italy, on watch for downgrade after it concluded a "comprehensive solution" the region's debt crisis is "technically and politically beyond reach."
In cutting its outlook on France, Fitch said it reflects its view that the likelihood of liabilities arising from the worsening economic and financial situation in the euro zone has materially increased. Fitch also said that in its view, France is the most exposed to further intensification of the crisis relative to other euro-zone members with its ratings.
The credit-rating firm also noted that France's ratio of government debt to gross domestic project is expected to peak at about 92% in 2014, a higher rate than other triple-A rated nations—with the exception of the U.K. and the U.S.The Sun suggests that if Spain and Italy do suffer a drop, the chances for a Euro collapse go up.
The downbeat news for France is exacerbated by another report -- one that CBS Market Watch says points to France heading toward recession.
The National Institute of Statistics and Economics said Thursday that the France’s gross domestic product will contract by 0.2% in the fourth quarter of 2011 and by 0.1% in the first quarter of 2012, before edging up 0.1% in the following quarter.
Data released by the institute on Friday showed business confidence in France’s manufacturing sector has declined, dropping from 96 points in November to 94 points in December.
And let's recognize that a recession in Europe, however mild it might be (and it could be serious), will have repercussions in Asia and North America. Not good.The institute said a cooling off in corporate demand and a tightening of credit will discourage businesses from making investments, causing the downturn. It predicts weaker job creation and an increase in unemployment from 9.3% in the third quarter of 2011 to 9.6% in the following period, a level that will be sustained until mid-2012.