/Moody’s is about to degrade the French rating, so what?
Moody's Is About To Degrade The French Rating, So What?

Moody’s is about to degrade the French rating, so what?

According to “L’Opinion”, the rating agency is preparing to raise France’s rating from Aa1 to Aa2 on Friday.

Moody's agency is expected to announce, on September 19, 2014, the downgrade of the French rating from Aa1 to Aa2, according to "L'Opinion".  (CEM OZDEL / ANATOLU AGENCY / AFP)

The loss of the French triple A in January 2012 caused an earthquake. According to L’Opinion, Thursday, September 18, Moody’s will announce on Friday, at the close of the stock market, the downgrade of the French rating from Aa1 to Aa2. In general near indifference, even if the government, and François Hollande, denied having been informed by the rating agency. Explanations.

This is neither a surprise nor a bad mark

First, Aa2 represented the third best score on the rating grid for agencies which has 21, “Or the equivalent of a 16 or 17 out of 20”, note Point.

In addition, during the first downgrade, Moody’s had given the criteria that could push it to lower the rating further: “If our confidence in the implementation of reforms or their effectiveness is eroded. If the medium and long-term growth prospects deteriorate further. Or if our expectations on the medium-term debt trajectory approached 100% of GDP ”, sum up The echoes. However, both from the point of view of growth and that of debt, Bercy mourned its objectives at the time: the deficit will not be brought below the 3% of GDP mark in 2015, and the outlook for growth remain sluggish.

In addition, the agency Standard & Poor’s, competitor of Moody’s, has already lowered the French rating at the third rung of his table, ie “AA”. Besides, “The markets already consider that France is rated AA, explains the team thing quoted by the economic daily. Only negative signal, France wins a little more countries in triple A: Germany, Austria, Finland, Luxembourg and the Netherlands.

France will continue to borrow at low rates

“Theoretically, a degradation reflects the greatest exposure of a state has a ‘accident from credit'” and so issupposed to lead to an increase in the rates at which this state borrows on the markets ”, Explain Release.

Except that the deflationary threat has forced the European Central Bank to lower its key rates to historically low thresholds. As a result, “There is an overabundance of liquidity [à investir] or, yields are low everywhere and risk appetite is still limited: investors therefore often favor security when buying government securities, explains Frédéric Bonnevay, an economist and member of the Cercle des fiscalistes, to the daily.

“Since the beginning of the year, Agence France Trésor has borrowed funds by paying an average rate of 1.51%, against 4.12% during the period 1999-2008”, highlighted Point. And since August, Paris has even borrowed with negative short-term rates.