Old Man Europe is getting sicker: Now France on watch to lose its coveted Aaa status

Now France in danger of losing its coveted Aaa status.  Where does this end?  

France thusfar has been bailed out twice.  Not directly, however, its banks are some of the biggest holders of Greek and Irish debt.  Bailouts don't make sense.  They just transfer the risk of default to some higher entity and ensure that the whole system is corrupted. 

This Eurobailout mania is putting the Euro in danger.  Via Bloomberg
“If problems in the euro zone aren’t solved quickly, then the conditions of refinancing will be expensive for these countries and the ratings agencies will do more downgrades,” said Ralf Ahrens, who helps manage about $20 billion as head of fixed income at Frankfurt Trust. “We already see these dynamics in the market. I see France as a risk.”

France’s credit rating is susceptible unless the country makes “meaningful reductions” to its deficit, said Padhraic Garvey, head of developed-market debt strategy at ING Bank NV in Amsterdam. The nation’s banks are the biggest holders of debt issued by the region’s so-called peripheral countries, posing possible “systemic risks,” added Markus Ernst, a credit strategist at UniCredit SpA in Munich.

Costs to insure French government debt trebled this year, rising to an all-time high of 105.5 basis points today, according to data provider CMA. Credit default swaps tied to Czech securities gained 1 basis point to 91 and Chilean swaps were little changed at 89 basis points.

The credit default swaps tied to the French bonds imply a rating of Baa1, seven steps below its actual top ranking of Aaa at Moody’s, according to the New York-based firm’s capital markets research group.


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