France News: France and EU Debt Crisis, Sarkozy, Merkel
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Pandemonium. Chaos. Anxiety.
Some analysts are even saying that the recent several weeks of market volatility signals a broader global shift in the economy, “the end of the world as we know it.”
Indeed, since Standard & Poor’s downgraded the US debt from AAA to AA+, there has been anxiety in the markets. There is a lack of trust in the US’s ability to repay its debts and a possibility for a decrease in value for US Treasury bonds, although this last point has not yet come to reality, as yields are falling to historical lows, as investors are more worried about the significant stock market equity losses (decreases in company market capitalization from Dow Jones and Nasdaq to S&P 500, CAC 40, FTSE, DAX, etc).
But the US debt is not the only reason stock markets are plunging. Indeed the Euro zone has been suffering from a lack of stability due to debt crises in Greece, Spain and worries in Italy, Portugal and Ireland as well. Even recently there were rumors that French bank exposures to Greek debt could result in a downgrade of French debt (though the S&P denied this just on Thursday).
France is announcing measures to reassure investors around the world that they can get its in debt in line, as Prime Minister François Fillon recently stated. (French newspaper Le Figaro has a special in-depth focus on the crisis for background information).
But former French economic minister and current IMF head Christine Lagarde has cautioned moderation regarding austerity measures across Europe, since while reducing debt is a good thing, there is a risk it could negatively impact economic growth and in turn cause instability in the markets. That is the delicate balance to find that is challenging many country leaders, from Europe to the US: to reduce government debt while ensuring measures to spark economic growth.
President Nicolas Sarkozy recently met with German Chancellor Angela Merkel in Paris to seek a common position on Europe’s response to the fiscal crisis, with mediocre results that did not convince investors of Euro zone unity facing the sovereign-debt crisis. Will Europe succeed in reassuring investors sooner than later? For now it looks less reassuring since Germany is quite firm in its resistance to transfer more fiscal decision-making power to Brussels.
We can only see how this develops. You can keep a close eye on the markets news with Bloomberg, the Economist, BBC, CNBC, the Wall Street Journal, Financial Times…but also French publications such as Les Echos, BFM Business and La Tribune.
Hang in there!
Michael Barrett writes BonjourParis Sunday news roundups from France. More at his blog American Expat in France.
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