France review from Standard & Poors.
- They believe that France likely to stay the course on economic reforms although they see implementation risks
- Negative outlook indicates that S&P could lower long-term rating this year or next if France deviates from its fiscal path
- Projects that current account deficit will stabilize at around 1% of GDP in 2015-16
- Anticipate a somewhat smoother fiscal adjustment path over 2015-2018
There is lots of good news here and it’s clear that the negative outlook will be removed if France stays on its current path for another 6 or 12 months.
But it’s not enough good news to move the euro, which has slid back down to 1.0589 after rising to 1.0635 a few hours ago.
S&P sees Spain in stronger position.
- Reforms since 2010 put Spain in favorable position to benefit from weaker oil, depreciated euro and QE
- Have raised 2015-2017 average annual GDP projection for Spain by 0.3 pp to 2.2% with some upside potential
- Expects ECB policy to gradually lead to private sector lending as Spain’s recovery gains momentum
- Expect Spanish net govt debt to peak at over 93% of GDP in 2017
Plenty of good news in the ratings report but most of it is because the ECB is driving rates (and the euro) down.