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France credit downgrade: what the analysts say

Eurozone crisis deepens as France loses its AAA rating with one of the three big credit rating agencies

Charles St-Arnaud, Nomura

The French downgrade will be more political than economic. Now that France has lost its AAA status, it will give even more power to the German chancellor in negotiations.

Samarjit Shankar, Bank of New York Mellon

We’re starting to see big portfolio managers isolate the eurozone altogether and look elsewhere. They have by now discounted the fact that Europe is not going to get its act together.

David Woo, Bank of America-Merrill Lynch

The good news is that since the start of the year, US data has been reasonably strong. If that continues, it could make recession in Europe more shallow.

David Song, currency analyst at DailyFX

The downgrades could spark a flight to safety as the heightening risk for contagion bears down on investor confidence.

As the ongoing turmoil drags on the real economy, the European Central Bank may have little choice but to expand monetary policy further. Additionally, we may see the governing council continue to ramp up its balance sheet in an effort to shore up the banking system.

Richard Driver, Caxton FX

We all knew S&P was going to get its axe out but it has come a little sooner than expected. Sarkozy will be furious … China will certainly be reviewing its holdings in the eurozone as a result of this.

Gary Jenkins, Swordfish Research

It would be a shock if the agencies had not downgraded after all the talk and warnings. But all ratings are a relative view of default probability, so relatively this is not nice for France. I would say that if Germany stays AAA that is about the best outcome possible from this starting point.

Scott Sherman, Credit Suisse

Over the long term, I’m not really sure that it makes that much of a difference but when people see these negative headlines they’ll move into the safety of US treasuries. © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds