Tuesday, October 18, 2011

Moody's warns France on possible negative outlook

Moody's warned on Monday it may slap a negative outlook on France's Aaa credit rating in the next three months if the costs for helping to bail out banks and other euro zone members stretch its budget too much.

The warning comes as European Union leaders are discussing measures to protect the region's financial system from an expected Greek debt default. Those measures should include injection of capital into banks with exposure to Greek debt.

France and Germany are the two strongest economies among the 17 euro zone members, and they are spearheading a plan to be presented at an EU summit on Sunday to help resolve the region's debt crisis.

France's progress on crucial fiscal and economic reforms as well as potential adverse developments in financial markets or the economy will also be taken into account under the review, Moody's said.

A negative outlook would be a sign that Moody's could downgrade its rating on France in the next couple of years. Moody's had placed the United States's Aaa rating on negative outlook in August.

"The deterioration in debt metrics and the potential for further contingent liabilities to emerge are exerting pressure on the stable outlook of the government's Aaa debt rating," Moody's said in a statement. more