Global markets continue to lose confidence in French banks

The corporate logo of the Societe Generale bank is pictured on January 25, 2008 in Paris, France.

JEREMY HOBSON: The see-saw continues in global markets this morning. European stocks have just gone from up to down. And the focus is France. Fears about the country's debt problems have led to concerns about insolvency at the major French bank Societe Generale. The French government says those concerns are based on unfounded rumors.

Marketplace's European Correspondent Stephen Beard has the latest.


STEPHEN BEARD: Along with Germany, France is one of the pillars of the Eurozone. But now even France is beginning to buckle.

Rumors that it was about to lose its AAA credit rating sent stock markets reeling yesterday. But the ratings agencies denied the story. And this morning markets bounced back. Now they're flagging again.

Hardly surprising says Simon Tilford of the Centre for European Reform. He says France will likely lose its top credit rating, given the size of its national debt and its growth prospects.

SIMON TILFORD: They are probably worse than those of the U.S. So there is a considerable likelihood that France will be downgraded over the next few months. It will be surprising if they weren't.

And there are growing doubts about the French banking system. According to Reuters one Asian bank has stopped lending to the French. And others may follow suit.

In London, I'm Stephen Beard for Marketplace.

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