Rumours are that France is about to be downgraded by Standard and Poor.

[headfairy]

Any financial whizzbods care to give an opinion as to what that might mean for the rest of us?

It has been downgraded. Dh said bound to weaken the euro (although was quite hard to get a coherent answer as dd stuffing mini cheddars in his mouth so not the most eloquent of his thoughts).

downgrade won't be confirmed for about 30 mins... was expected apparently. I'm reliably informed it makes a Greek exit from the Euro more likely.

There is something about Greek debt talks collapsing - not sure whether the downgrade is part of that.
Oh and it's a French government leak re downgrade so not official yet

It has, also Austria

I'm told the downgrade has bigger implications for the Euro bailout fund, is that what you mean Gigondas?

Yep- I think talks were failing for other reasons (ie lenders were iffy about amount of write down) but if one of main fund guarantors (for want of a better word) has been downgraded it isn't going to help.
I can't wait to see what comments come
Out on relative ranking of our debt - that will kick off again

The effect will be nothing. Why? Because in reality, the market already had downgraded France. So despite technically having the same AAA status as us, the interest rates that were being demanded for them was much higher.

All this does is make it official and is just a matter of pride for the French. But everyone's been expecting this for some time. The only real surprise was the fact they tried to drag us down with them.

The more important issue today is negotiations over Greek debt writeoffs are in deadlock. Greece may default on all its debt by March unless the talks are successful. That would be a real shock for the markets and the threat of it is already causing the entire European money market is seize up and banks are unwilling to lend money. This is already causing the European economy to slip into recession.

I can only really see one way out of this. And that's for Germany to in effect guarantee the Greek debt.

Given that's never going to happen, I fear it's not going to end well.

BBC article on this.

France is not the only Eurozone country to have been downgraded today, and it has provoked stock market falls.

One angle on this is the effect on Sarkozy's re-electability. Elections are due in April. His socialist opponent is well ahead in the polls. This announcement further damages Sarkozy's campaigning angle that he is the man to see a france though this crisis.

Hollande has said he does not support the Sarkozy/Merkell deal, so unless it can be brought into effect before April, it will collapse and there Amy well be further Eurozone turmoil. This may well be the real reason why Sarkozy was so vituperative about Cameron's "non" - without UK, getting any of it into effect in time became far, far harder.

I don't think it's at all suprising that Sarko et al are calling for GB to be downgraded too. It is the usual sour grapes that GB is on the outside doing (marginally) better than, in the opinion of the Eurocrats, it should. Other than that, agree with what you say NiceGuy.

Sarko is a bloody fool when if he looses the election it is siad the far right party La penn is very close in the poles and could win or make significant gains the euro will collapse any was

Germany cannot and won't want to be associated with a far right govermnet and they have in any case promised to pull out of the euro and the EU on day on of taking power

So this austerity thing doesn't seem to guarantee the lurve of the markets, does it?

France has not been doing the austerity thing. Fundamentally, Greece, Italy and Spain are bankrupt. The French have been downgraded as their banks will need a bailout when Greece leaves the Euro, and they can't afford it.
It will be messy, but not for more than a few years.

Maypole1: could you link the polls you mean?

I'm not keeping a terribly close eye on the French elections, but Reuters was reporting in December that Hollande was ahead (31.5%), then Sarkozy (26%) LePen (13.5%) and Bayrou (13%). Has it changed a lot since then?

i saw a poll today that said, Le Pen is now just a few points behind Sarkozy.

So this austerity thing doesn't seem to guarantee the lurve of the markets, does it?

No, of course not but continuing to borrow money like it's going out of fashion is definitely a way of pissing off the markets.

The problem is that despite all the press attention and the political battles, they still haven't really addressed the root cause and are still tinkering around trying to find a politically acceptable way out of this crisis.

Had they took the hard decisions and the pain right at the beginning I suspect we'd be in a different situation right now.

At the end of the day, a credit rating is just an opinion on how likely you are to pay back what you borrow. The general consensus of opinion is that France, with it's various financial woes, is now considered slightly less likely to pay back all its debt than was the case a few weeks ago.

To be fair, the bond market already knew this and priced bonds accordingly. That's why last week German and French bonds (both at the time AAA status countries) were trading at very different rates.

Generally speaking, the rating agencies reflect economic opinion, they don't drive it.

I see the credit rating of the EFSF has now been downgraded. So the backstop guarantee fund just got smaller as well.

Hedge funds are holding the Greece negotiations to ransom by demanding full repayment and no voluntary haircut and S&P have just said Greek default is now very likely.

Portugese 10 yr credit spreads blew out 180 bp over Bunds so it looks like Portugal is being lined up as the next country under attack.

Still, there is a European summit in 2 weeks time so I expect it will all get sorted by then. As if!