Fitch places EU rescue fund on rating watch negative over France worries

Published Wed, Oct 15, 2014 · 10:50 PM
Share this article.

[Paris] Fitch ratings agency on Wednesday 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 US$650-billon fund set up during the eurozone 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 eurozone'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. - AFP

BT is now on Telegram!

For daily updates on weekdays and specially selected content for the weekend. Subscribe to



Get the latest coverage and full access to all BT premium content.


Browse corporate subscription here