Kai Ryssdal: Yet another lesson from the past couple of days is that market turbulence pays no mind to national pride. France is one of Europe's most proud nations, but it's been taking a licking this week. There were the bank rumors yesterday about Societe General, and reports that France might -- like us -- be stripped of its AAA credit rating.
From the European Desk in London, Marketplace's Stephen Beard reports.
Stephen Beard: France is one of the twin pillars of the 17-member Eurozone. Alongside Germany, it's the mainstay of the single currency, and therefore carries much of the burden of bailing out the weaker members.
That's the problem, says economist Simon Tilford.
Simon Tilford: Because Spain and Italy are now in trouble and might need bailouts, investors are getting increasingly concerned about the impact that will have on the credit worthiness of other core Eurozone economies.
And France in particular because French banks have been the most extravagant lenders in Europe and may also need bailing out by their government.
Daniel Gros of the Centre for European Policy Studies.
Daniel Gros: The French banks are much more exposed to both Spain and Italy, which are the two candidates which are most at-risk right now.
All this fueled yesterday's rumor that one of France's biggest banks -- Societe General -- was in trouble, and that France itself was about to lose its AAA credit rating. Both rumors were emphatically denied. But there's been an ominous development today: an unnamed Asian bank has reportedly stopped lending to French banks.
Gros: If the French banks come under attack, if they are cut off from refinancing from other banks, then the French economy will go down and French public finances will deteriorate.
And France could indeed lose its top credit rating, undermining its ability to contribute to the bailout fund. The Eurozone is drifting closer to the reefs, says Bob McGee of research firm Independent Strategy.
Bob McGee: We remain in this area of uncertainty and doubt, which could lead actually to a significant crisis over the next two months unless we see action particularly from the Germans.
Today, French President Nicolas Sarkozy said he'll meet German Chancellor Angela Merkel in Paris next Tuesday. Could be promising, says Simon Tilford.
Tilford: The fact that contagion has now spread to France will hopefully focus minds.
But Merkel was reluctant to prop up the Euro when she had the pillar of France to depend on. Will she do it now that that mainstay is buckling?
In London, I'm Stephen Beard for Marketplace.