Comments
Fitch ratings agency has put the EU’s 500-billion-euro bailout fund on review for a possible downgrade, triggered by concerns over France’s battle to tame a ballooning budget deficit.
The agency said in a statement that it had placed a “rating watch negative” on the “AAA” score of the European Stability Mechanism — a USD 650-billon fund set up during the Euro Zone crisis to bail out troubled countries and their banks.
The move comes a day after Fitch placed a rating watch negative on France’s ‘AA+’ score.
A downgrade of France, the Euro Zone’s second-largest economy and a key contributor to the ESM, would call into question the creditworthiness of the bailout fund, Fitch said.
France is battling through a deep economic crisis, with zero growth in the previous two quarters and sky-high unemployment.
Paris announced last month that next year’s budget deficit — the shortfall between revenue and spending — will hit 4.3 per cent of annual economic output, well above the 3.0-per cent ceiling set by the European Union for member states.
Fitch also placed the European Financial Stability Facility (EFSF) on rating watch negative. The EFSF, rated “AA+”, was created as a temporary mechanism and no longer gives out fresh loans.
“Fitch anticipates any downgrade of France would be limited to one notch; hence, the impact on ESM... and EFSF’s debt issues would be of the same magnitude,” it said.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.