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France’s `special Bond’ Raises Doubts Over Aaa Rating

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While there is no immediate threat to France’s elite `AAA’ rating, the agency said concerns may mount if the country fails to map out a clear path towards fiscal discipline over the next year or so.

President Nicolas Sarkozy plans to use the `national bond’ to fund research, hi-tech industries, and green energy, railways, and possibly defence, raising suspicions that the gambit is just a second “stimulus plan†dressed up as investment.

“Money is fungible,†said Brian Coulton, head of sovereign ratings for Europe at Fitch. “The question is whether this is a substitute for other spending that they were going to do anyway. Although France has been less exposed to the financial crisis than Britain or the US, it started with a higher debt level, so it has less headroom. Finances are getting stretched to a significant degree. We expect to see announcements of stronger consolidation in all the main AAA countries in 2010, including France,†he said.

The exact size of the special bond is still unclear. Barclays Capital said it was likely to be cut back to below €40bn, but even that would push the budget deficit to 10.4pc of GDP next year. The overall public debt would rise to 89pc, potentially the highest of the AAA club of states.

The level of extra spending would be breach the spirit of the Maastricht Treaty and risk a confrontation with Germany over the basic ground rules of Europe’s monetary union.

The special bond or “Emprunt†has caused intense controversy in France, where there is already deep concern over rising debt and state liabilities.

Former presidential candidate Francois Bayrou called the plan “surrealâ€. “We already have a budget deficit of €140bn. Is there no limit to this excess. At the end of the day, this is debt that we will have to repay,†he said.

Mr Sarkozy appears more concerned about the rumblings of discontent in France’s industrial cities, where angry workers have begun to take the law into their own hands with “boss-knappings†and threats to sabotage plant.

Yet more debt to solve a debt crisis.


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President Nicolas Sarkozy plans to use the `national bond’ to fund research into wtf anyone can do

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Honestly, Sarkozy won't be doing anything with this bond cash. He's too busy/infatuated with the new Madame Sarkozy. :lol:

This idea is the work of the shadow figures in his entourage. I expect most of the cash to be channelled into companies that support the right-wing parties...the main one being Sarko's UMP party.

Debt, debt, debt. It's all going to go tits up everywhere. France will not miss out on this party :ph34r:

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