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Economist says French downgrade inevitable, move greeted with cynicism on the streets

posted 20 Nov 2012, 07:40 by Mpelembe   [ updated 20 Nov 2012, 07:40 ]

A senior economist says downgrade of France's triple-A rating was inevitable, given the country's economic performance but Moody's cut in the long-term credit score is greeted with cynicism on the streets of Paris.

BRUSSELSBELGIUM (NOVEMBER 20, 2012) (REUTERS) -  A senior economist said Moody's decision to strip France of it's triple-A credit rating was inevitable given the worsening economic situation in the country but the move was greeted with scepticism and cynicism on the streets of Paris on Tuesday (November 20).

Carsten Brzeski, a senior economist with ING in Brussels said Moody's move had been anticipated by the controversial headline in this week's Economist news magazine which branded France a time bomb at the heart of Europe.

"I think it was not a surprise. Even now, The Economist is maybe the better rating agency because we had a big article on France. I think France now has to pay the price for a longer period of not doing its homework," he said.

"Why? I think there are three problems in the French economy right now: first one is really the lack of competitiveness. The second one are unhealthy, almost unsustainable public finances, third one is high unemployment and the lack of private consumption. So the combination of these three factors makes France probably the next sick man of the euro zone," he added.

The Economist's "Time bomb at the heart of Europe," article on France sparked widespread anger among politicians when it was published last week, who branded it malicious Anglo-Saxon finger pointing.

Although largely expected, Moody's cut in France's long-term credit rating to Aa1 was a blow to the government of new Socialist President Francois Hollande who was voted in last year on a platform of more growth and a cut in unemployment.

His government earlier this month unveiled a package of 35 measures to boost competitiveness -- the main reason Moody's gave for the cut and officials have said the unprecedented package of measures will help restore France's performance compared to that of Germany.

Moody's is the second of the three large rating agencies to strip France's triple-A rating. The third will report next year.

But on the streets of Paris, the move was greeted with ill-concealed scepticism.

"It's interesting to see that credit rating agencies are superior to states. And for me, it's the politicians that are the puppets of these people whom we don't know and who control everything that happens financially. It's crazy to see states that are obliged to borrow money when they can just print it," said one passer-by.