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Quick Edit | Next in the line of fire

Quick Edit | Next in the line of fire
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First Published: Tue, Aug 09 2011. 01 39 AM IST
Updated: Tue, Aug 09 2011. 01 39 AM IST
It’s interesting to speculate on the next member of the club of AAA-rated sovereigns in the line of downgrading fire.
Only rating agencies can give a definite answer to that. But three days after the US downgrade, France, it seems, is in a hard spot. Among AAA-rated countries, yields on its 10-year government securities are one of the highest. Credit default swaps on France are more than double those of the UK—it is one of the most expensive AAA-rated countries to protect against a default. While this is not an indicator of how likely it is to be downgraded, it speaks of how jittery markets are.
The danger to France comes from its being a big pillar of the euro zone economy: If its share of liabilities in, say, protecting Italy and Spain rises—as it may—then its burden can rise dramatically. The markets can see these dangers plainly.
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First Published: Tue, Aug 09 2011. 01 39 AM IST
More Topics: Quick Edit | Markets | US | Rating Agencies | France |