UBS Report Says France Downgrade Won't Threaten EU Credit
UBS analysts report that a potential sovereign credit rating downgrade for France is unlikely to impact the overall creditworthiness of the European Union.
A research report from UBS indicates that a potential downgrade of France's sovereign credit rating is unlikely to threaten the overall creditworthiness of the European Union. The analysis precedes a scheduled review of France by Moody's on October 23. Moody's currently rates France Aa3 with a negative outlook, while S&P and Fitch Ratings both assign the country an A+ rating with a stable outlook.
UBS analysts suggest France would need to drop significantly further—to Baa3 under Moody's or BBB under S&P—before it would impact the EU's weighted-average credit assessments. The report identifies Germany as a more significant potential vulnerability to EU debt obligations than France.
Long-term concerns cited in the report include political resistance to fiscal integration. Specifically, the analysis notes French proposals to reduce EU budget contributions and German opposition to further joint borrowing. The European Commission maintains the authority to request additional contributions from member states if a country fails to meet its debt obligations.
