Paris (MNI) – French Finance Minister Francois Baroin said Monday
that France’s financing costs remained “very favorable” despite the
recent rise in bond yields and the widening of the spread between French
and German borrowing costs.
“The current level of rates corresponds to financing conditions
that are very favorable,” Baroin said in a statement. He noted that the
government’s 2012 budget was based on more “prudent” rate levels that
existed prior to the recent cut in rates by the European Central Bank.
Baroin’s statement followed a comment from Moody’s in its weekly
credit outlook that the recent rise in French bond yields was a negative
factor for the country’s ‘AAA’ credit rating.
“Elevated borrowing costs persisting for an extended period would
amplify the fiscal challenges the French government faces amid a
deteriorating growth outlook, with negative credit implications,”
Moody’s said.
The spread between French and German 10-year bond yields climbed
above 200 basis points last week amid Eurozone market tensions. The
spread narrowed to around 155 basis points on Monday.
Baroin said that the austerity plan announced by the government on
November 7 would generate E17.4 billion of savings by 2016, allowing
France to eliminate its budget deficit.
“These measures will not have a negative effect on growth in the
French economy,” Baroin added
–Paris newsroom, (331) 4271-5540; jduffy@marketnews.com
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