French government to investigate false downgrade notice
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Steve Chiotakis: The French government said today it wants an investigation into new allegations that ratings agencies sent out a false downgrade notice.
From Paris, here’s the BBC’s Christian Fraser.
Christian Fraser: Some weeks ago the credit rating agency Moody’s put France under ‘observation’ — a warning that unless there were sizeable reforms, France would lose its pristine AAA credit rating.
In response, Paris passed a pair of major budget cuts, slashing $100 billion in spending. The French thought that was enough to satisfy the markets.
But then yesterday, the rating agency Standard & Poor’s announced a downgrade.
Investors were spooked — the announcement made them think that French debt was a riskier bet. But it wasn’t.
S&P immediately backtracked, saying the announcement was a technical error. The firm apologized.
Economist Graham Turner of GFC economics says the French already had unofficial worries about the agencies. This mistake will turn that into an official investigation.
Graham Turner: It gives the European Commission all the political cover it probably would want to actually justify their actions.
President Sarkozy has long supported plans to curb the influence of ratings agencies. He’s already advocated for European proposals that would set up government-backed rival bond raters.
In Paris, I’m the BBC’s Christian Fraser for Marketplace.
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