Thu, Jan 12, 2012 - Page 10 News List

Fitch reassures on France’s top rating

COMPLAINTS:While the German chancellor and IMF chief met to discuss Greece’s debt, Italy’s PM warned of a possible anti-EU backlash in his country for lack of recognition


Ratings agency Fitch offered a ray of light for the eurozone on Tuesday as German Chancellor Angela Merkel met IMF Managing Director Christine Lagarde on Greece’s struggle to cut its debt, amid tentative signs of progress.

While the agency said Italy was the most worrying of the embattled eurozone countries and could see its credit rating cut this month, it also said France’s top “AAA” rating was safe for this year barring any significant economic shocks.

Speculation has raged for months that France, the second-largest economy in the eurozone, could lose its gold standard rating, plunging the bloc further into turmoil.

Continuing a flurry of diplomatic activity to find a solution to the crisis, Merkel hosted Lagarde in Berlin, a day ahead of a planned meeting with Italian Prime Minister Mario Monti.

A statement for the Washington-based IMF confirmed Lagarde held talks with other German officials, including German Federal Minister of Economics and Technology and Vice Chancellor Philipp Roesler and Federal Minister of Finance Wolfgang Schaeuble.

“We do not expect to provide any specific readouts from these meetings, or offer further comments,” the spokesperson said.

Lagarde made no comments to reporters on the sidelines of the talks and no public statements were scheduled.

Following her tete-a-tete with Merkel, Lagarde was expected to travel to her native France for talks yesterday with French President Nicolas Sarkozy.

Meanwhile, in Greece, the subject of most of the talks, progress appeared to be forthcoming on a deal with private creditors to accept losses that would help wipe 100 billion euros (US$128 billion) off its debt mountain of 350 billion euros.

Greek Prime Minister Lucas Papademos told his ministers that an agreement with banks could be reached by early next week, Greek news reports said.

“We are about to finalize shortly the negotiations on private sector involvement” in reducing Greece’s debt, European Commissioner for Economic and Monetary Affairs and the Euro Olli Rehn said at an economic seminar at the European Parliament.

International auditors are due back in Greece next week to take stock of the country’s economy after Papademos warned of an “uncontrolled default” in March without further aid.

Having already received most of a 110 billion euro rescue package from the EU and IMF in 2010, Greece reached a preliminary accord for a second 130 billion euro bailout with the eurozone in October last year.

However, this rescue package depends on private investors accepting a major writedown on the value of their holdings of Greek debt.

Merkel said on Monday that Athens must also ensure the “rapid implementation” of reform measures, warning that “otherwise it will not be possible to pay the next [aid] tranche to Greece.”

Nevertheless, Monti warned on yesterday of possible “anti-European” protests in his country if Rome’s reform efforts were not recognized, ahead of a key meeting with Merkel.

Speaking in German daily Die Welt, Monti complained: “The problem is that despite our sacrifices, we have not got anything in return from the European Union, such as a drop in interest rates.”

“Unfortunately, we have to say that our reform policies have not received the recognition and appreciation in Europe that they deserve,” the prime minister added. “If the Italian people do not soon see tangible success for their savings and reform efforts, there will be a protest against Europe, against Germany — seen as the driver of EU intolerance — and against the ECB [European Central Bank].”

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