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Will France be the next market downgrade?

As most of you have seen in recent days, world stock markets have been manic depressive, going through ups and mostly downs due in large part to widespread worries that the US debt downgrade from S&P and the fiscal debt in countries such as Greece, Italy, and Spain will result in worse market conditions for investors.

My other sovereign’s an AAA (The Economist)

There was a market backlash against French debt and enormous market losses for French banks like Société Générale, BNP Paribas and Crédit Agricole (exposed to Greek debt and other European sovereign debt) that is making investors increasingly anxious about France’s debt. Indeed as The Economist writes:

“France’s debt stood at 82% of GDP last year, from 64% in 2007. This is one of the highest of any AAA-rated country. That, investors fear, means it could be the next target for a downgrade, especially if already anaemic economic growth falters further. The extra yield required by investors to hold French debt instead of German Bunds jumped to almost triple the average level of 2010 while the cost of insuring against a default by France reached new highs during the week.”

Moreover, as The Telegraph writes, “French banks have €410bn (£360bn) of exposure to Italy alone according to the Bank for International Settlements. The twin crises in France and Italy are now intimately linked and appear to be feeding on each other.”

How will France proceed? According to a great, in-depth Bloomberg interview (embedding not allowed) with Philippe D’Arvisenet, global chief economist at BNP Paribas SA, France initiating austerity measures is “inescapable”. They go on to discuss France’s exposure to European sovereign debt, reform plans to cut spending but keep tax rates at current levels (though with elimination of some 500 tax loopholes).

The same Telegraph article states, “French president Nicolas Sarkozy has ordered a “general mobilization” to slash France’s budget deficit in a frantic effort to safeguard the country’s AAA rating and head off a downgrade by Standard & Poor’s.”

We will see how this plays out…for now, the markets will likely continue to be manic depressive. Hang on tight!

I leave you with this passage from the Telegraph article:

“…Marchel Alexandrivich from Jefferies Fixed Income said investors are worried that the latest contagion to France could bring the eurozone’s bubbling problems to a head in a dramatic fashion.

“If France is dragged into the problem, then we will hit crisis point. They will either have to move to a full-blown eurobond — and German politicians are set against that — or face a break-up. There is a significant chance that the euro will no longer exist in its current form within twelve months,” he said.
President Sarkozy said France would include a “golden rule” in its constitution to restore fiscal probity, adding that the fiscal targets for 2011 and 2012 were “untouchable”.

The new budget measures will be introduced on August 24 and are expected to include the closure of 500 tax loopholes.

The IMF said France has the highest debt ratio of any AAA state this year at 85pc of GDP and may have to tighten further next year. Like the US, France has also built up huge pension debt and contingent liabilities.”

Winter storms hit France, Europe; flights disrupted

December 2nd, 2010 No comments

As you have probably seen on the news, snow and cold weather has hit large parts of Europe, including a good portion of France. Although Paris has been spared most of the snow, it is still quite cold here, in the low 20’s at night (-7 Celsius), more like an average Chicago winter day. But in other parts of France, my friends in Grenoble, Lyon, Annecy, Eastern France all report anywhere between 8 and 16 inches of snow, so it’s quite a significant snowfall. England and Germany have been hit hard, as well as Poland, Italy and several other countries.

You can get updates for France from Le Point where they say that likely 25% of flights at Roissy CDG are cancelled and 10% at Orly for Thursday. But they said snow will last another 24 hours in France before likely turning to rain. Authorities are having a difficult time de-icing and salting highways, so be careful driving in France. Here is a map of temperatures (Celsius) for Thursday in France.

CNN also covers the storm in Europe, and flights at airports like London Gatwick, Frankfurt and Munich have been significantly disrupted with cancellations and major delays (NB their 3rd picture is Lyon’s Place Bellecour). BBC writes that flights have been severely disrupted as well in Brussels, Vienna, Dusseldorf, Amsterdam, Geneva, Berlin, London Heathrow and Prague. Over 3,000 people in high-speed German trains had to spend the night in the train as they were blocked by weather. They too have pictures of the storm in Europe (once again with 4th picture in Lyon).

You can get travel updates for Paris airports here. Check with your airline as well and the airports for your cities. France24 has a comprehensive guide for travel in snow-covered France and Europe. High-speed rail like TGV in France has been somewhat delayed. Check Infolignes SNCF for alerts.

For French weather, check Météo France. Bundle up, save travels!

Oct. 20 update on French strikes: transport, fuel, schools

October 20th, 2010 2 comments

Following yesterday’s big day of “action” around the country against the retirement reform proposals, the Paris metro and bus system is running on normal schedule, mostly (“normal ou quasi normal” according to their site). But check the “traffic” part and you’ll see that suburban and Ile de France regional trains are partially disrupted, often running at 50%. Also, 30 flights were cancelled this morning from Paris Orly.

Lyon’s TCL transport system is disrupted today, with no metro on the Presqu’ile downtown area due to clashes. Try to stay out of that area. You can get more inside info on Lyon at Le Progres (Lyon newspaper) site.

There are some SNCF train disruptions in France and with connecting trains to other countries (like no overnight trains tonight between France & Italy and France & Germany…). TGV’s to and from Paris are running 2 out of 3, and TGV’s outside of Paris at 50%. More details on that site, France 24’s survival guide and Figaro’s guide.

These past couple days have been marred by violence in Lyon and parts of Paris area, among other places, between youth and police. France 24 reports on this. They also have some pictures from Lyon here.

President Sarkozy is calling for the strikers to “be responsible” and recognized that although the reform is difficult, it is necessary, and his government had included special measures for specific work cases such as those who started work early and those in particularly arduous jobs. The reform vote has been delayed until Thursday, and a poll by Figaro finds that nearly 70% want to see the reform passed as soon as possible. (Note: Figaro is more conservative. Nouvel Obs is more leftist and has a poll where 62% of respondents want to continue the strikes).

Meanwhile Interior Minister Brice Hortefeux is firing back at thugs who erupted in violence yesterday and today, saying they will not be left unpunished.

As thousands of gas stations have run dry, the government is now freeing up fuel depots with force of special riot police similar to a SWAT team, but some remain blocked by extremist strikers who like taking the country hostage for their own interests. Flights in and out of France are said to be carrying enough fuel for the return journey.

High school students and youths are still calling for protest today, even though the reform is in their interest. They should be screaming “we don’t want a pension” as they strike. I understand concerns about unemployment, but that can be addressed by other measures. They are mad at Sarkozy for what they see as extravagance and wastefulness on the part of the government, which is in part true. But that does not mean pension reform is not necessary. BBC looks into this with an insightful special called “children of the revolution.”

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