Two biggest French banks downgraded by Moody's

Updated: 2011-09-15 07:47

(China Daily)

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 Two biggest French banks downgraded by Moody's

A cab driver kicks a police barrier outside the Greek parliament during a protest in Athens on Tuesday. About 5,000 taxi drivers gathered in protest, angry at government plans to open up their licensed profession to more competition. The reforms were demanded by Greece's rescue creditors, as part of an effort to cut government spending and regulatory control of the private sector. [Thanassis Stavrakis / Associated Press]

PARIS - Moody's ratings agency downgraded two top French banks in a new lurch for the euro zone crisis on Wednesday, and EU leaders issued dire warnings that the European Union could be torn apart by the eurozone debt crisis, as the risk of Greece defaulting grows.

"Europe is in danger," Polish Finance Minister Jacek Rostowski, whose country holds the rotating EU presidency, told the European Parliament in Strasbourg ahead of emergency talks between leaders from Germany, France and debt-hit Greece.

"If the eurozone breaks up, the European Union will not be able to survive, with all the consequences that one can imagine."

Moody's cut of the rating for Credit Agricole bank, one of the biggest in Europe, from Aa1 to Aa2 and Societe Generale's from Aa2 to Aa3 because of fears over their exposure to Greek sovereign debt. It left French banking major BNP Paribas on negative watch.

Despite the downgrade, shares in Credit Agricole rose by 2.13 percent in early trading on Wednesday, while shares in Societe Generale and in BNP Paribas fell by about 3 percent.

Shares in all three banks have plummeted in recent weeks amid turmoil over the eurozone debt crisis.

The euro faced selling pressure after Moody's downgrading of the French banks. The euro and stock markets were buoyed on Tuesday by reports that China was in talks to buy Italian government bonds.

European shares and the euro rose on Wednesday after the head of the European Commission said it would soon present options for the introduction of euro area bonds, a development investors saw as a positive despite German opposition to the idea.

The comments from Jose Manuel Barroso helped reverse earlier losses for the single currency and European stocks triggered by the downgrade of two big French banks' credit ratings.

Common euro zone sovereign bonds are perceived to be part of a solution as they would give weak euro zone states renewed access to funding in commercial markets.

Barroso's words repeat an earlier pledge from EU officials to make such proposals in October, while Germany, without whose approval the scheme cannot be introduced, remains strongly opposed to the issuance of common bonds.

German Chancellor Angela Merkel, French President Nicolas Sarkozy and Greek Prime Minister George Papandreou are scheduled to discuss the Greek emergency at a teleconference on Wednesday.

The teleconference was decided in view of informal talks between EU finance ministers and central bankers in Wroclaw on Friday and Saturday.

Merkel fought on Tuesday to soothe alarm on markets over Greece, saying everything would be done to avoid an "uncontrolled insolvency" and stressing that the eurozone would remain intact.

Merkel's comments followed a stern warning from US President Obama that the global economy was unlikely to recover until the eurozone debt crisis was contained.

US Treasury Secretary Timothy Geithner is scheduled to attend Friday's meeting of EU finance ministers and central bankers.

The emerging economies of Brazil, Russia, India, China and South Africa, which constitute the BRICS group, are to discuss possible aid to Europe to ease the crisis, Brazilian Finance Minister Guido Mantega said.

He and his counterparts are to discuss the issue in Washington on Sept 22. They will be in the US capital next week for the annual meetings of the International Monetary Fund and World Bank.


(China Daily 09/15/2011 page12)


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