Threat of French Downgrade Endangers Eurozone Plan

Moody’s Investors Service said late Tuesday that France’s top-grade credit rating was under pressure from the eurozone crisis. The news could mean trouble for the plan being assembled by European leaders to avert a complete economic meltdown, because without France’s triple-A rating, more pressure could fall on Germany to provide support for the plan. There is strong opposition in Germany to additional bailouts at taxpayer expense.

Reuters reported that Moody’s took the unusual step of warning about France’s rating despite the fact that the country is not on a ratings watch. In its annual report on France, the agency said, “The deterioration in debt metrics and the potential for further contingent liabilities to emerge are exerting pressure on the stable outlook of the government’s triple-A debt rating.” It warned that Paris might be the recipient of a negative outlook if its budget is under too much stress.

The warning came five days before the European Union meets to consider a plan to resolve the ongoing debt crisis, bolster Greece to avoid default and find a way to leverage the European Financial Stability Facility to sufficient strength to restore investor confidence in the health of Italy and Spain.