Friday, November 20, 2009

Fitch Warns on 'Record' French Debt

France has ditched the "Happiness Index", but this doesn't mean they aren't economically mad.

"Having entered the global crisis with one of the highest public debt to GDP ratios among 'AAA' sovereigns, France is now expected to record a debt ratio above 85pc at the end 2010, higher than projected for Germany or the UK," reports the credit rating agency, Fitch.

France's plan to shovel €35bn at research and hi-tech projects may well push the fiscal deficit above 10pc of GDP, and at the same time squeeze out private sector projects. The entire €35bn will be borrowed.

Fitch said France's rating was not yet in danger but the country would have to restore discipline as growth returns. Fitch did not explain how growth will return, when the true private sector will be squeezed. Moody's said the loan will cause France to "lose some altitude" within the triple-A club.

Among the nutty but politically favored projects that a commission appointed by President Nicolas Sarkozy has recommended the borrowed money be "invested" in: €3.5bn for green energy, €2bn for aerospace, and €4.5bn on sustainable housing.

EU member Germany has complained about the plan. France's budget minister Eric Woerth rebuffed the criticism, stating tartly: "We are not German."

1 comment:

  1. Wait......was that France or the US your post was on?