Wave of panic in France
Le Monde, 11 November 2011
The divergence reflects different perceptions on the part of investors in the two countries, both of which have an AAA rating. For Libération it has been prompted by "the mass exit of banks from the sovereign debt market," with European investors systematically getting rid of the sovereign bonds of Eurozone countries, which are deemed to be "risky":
The cry of every man for himself was launched by the German banks at the end of July, when Deutsche Bank offloaded 8 billion of Italian debt, triggering the penninsula’s descent into hell […] Day by day, the panic is spreading, with everyone eager to get rid of vulnerable assets. […] Worse still the mistrust of the Eurozone is mainly being fed by European market players – banks, insurance companies and pension funds – and not by external institutions.Market nervouness about French debt was reinforced by a major blunder on the part of ratings agency Standard & Poor's, which, on 10 November mistakenly sent out a “message” to some of its subscribers, which announced an imminent French downgrade. The story has been denied by S&P, reports Le Monde, which recalls that in mid-October Moody's became the first ratings agency "to take a stab at France’s AAA rating with the announcement that, over the next three months, it would determine if the stable outlook for the rating was still justified."
Finally on 10 November, the European Commission, in the person of Economic Affairs Commissioner Olli Rehn, responded to the announcement of a second austerity package unveiled on Monday by Prime Minister François Fillon with a request that Paris take "additional measures to correct its excessive spending deficit" in 2013. "Brussels estimates that France’s deficit will improve slightly to stand at around 5% of GDP in two years time, a result that is far from the 3% figure which France promised the Commission it would deliver", notes Libération.