French banks downgraded amidst growing eurozone crisis
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Steve Chiotakis: U.S. Treasury Secretary Tim Geithner will travel to Europe later this week, and he’ll do something American cabinet members rarely do — attend a meeting of European finance ministers.
Today, Moody’s downgraded the credit ratings of two of France’s biggest banks — Societe Generale and Credit Agricole — because of their exposure to debt problems in Greece, Italy and Spain. Also today, the German, French and Greek leaders are holding urgent talks about the crisis. Now for weeks, European financial markets have taken a beating because of fears that Greece is about to default on its debts — and other countries too.
The BBC’s Christian Fraser is with us now from Paris with the latest. Hi Christian.
Christian Fraser: Hello.
Chiotakis: What kind of an impact will the French banks’ credit downgrades have in France?
Fraser: I think they’ve already paid the price to be honest. We’ve seen share prices tumbling to their lowest level since 2009, down almost 50 percent over the summer because there have been these concerns for some time about their exposure to the debts of Greece, Italy and Spain. And that is reflected in today’s decision to downgrade them — albeit that it’s not as bad as it could have been, they were only pulled down one notch. And obviously the French government is trying to put a positive spin on it.
Chiotakis: The leaders of France and Germany, Christian, are having this conference call with the Greek prime minister. Has anything come out of that yet? And what is the French president Sarkozy going to be saying to leaders of Greece?
Fraser: We’re told they’re in constant communication with the Greek prime minister, but the concern of both the German chancellor and the French president is that they’re not meeting their targets that were set for them in June. It’s very difficult for the Greek prime minister because he is battling very strong public sector unions. But, for instance, they were expected to sell off public assets to raise €1.7 billion, and they’ve only raised 400 million — so there’s a big shortfall. And what is at stake here is the next tranche of this bailout money that Greece needs to pay public sector salaries and its pensions. If it can’t convince the eurozone that they are stepping up to the plate, then obviously there is the very serious risk of a default.
Chiotakis: We know that the German people aren’t very happy about bailing out Greece, but what do French people think about this eurozone crisis?
Fraser: Well obviously, the epicenter is Greece, but the reverberations are being felt now quite acutely in the French economy. And the big challenge for the French president is convincing not only the markets, but his own public — six months from an election — that Greece can be saved, but that it won’t impinge or impact on the French economy. And that’s not an easy one to pull off. So the way he handles this crisis over the next month will in some way impact on his election campaign. So there’s a lot at stake for him, not just in terms of the economy, but also politically as well.
Chiotakis: The BBC’s Christian Fraser in Paris. Christian, thanks.
Fraser: You’re welcome.
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