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14 January 2012

SARKOZY’S BLACK FRIDAY

President Nicolas Sarkozy of France has lost the forthcoming presidential election, in which he will be standing for re-election.

This is a prediction made today by Antigone1984.

Yesterday 13 January credit rating agency Standard and Poor’s downgraded France’s sovereign debt credit rating from the top AAA grade to AA+.

Sarkozy has pinned the credibility of his economic stewardship over the four years of his current mandate on France retaining its AAA rating.

According to a report on the BBC website on 14 January 2012, Sarkozy’s Prime Minster François Fillon told a news conference that if France was in the firing line, it was primarily because of its exposure to the crisis in the eurozone. According to Fillon, it was not French government policies that were under attack from the ratings agency. Consequently, the government would push ahead with its economic policies based on cutting spending and bringing the annual budget back into surplus by 2016.

However, Sarkozy’s main opponent in the presidential contest, Socialist Party candidate François Hollande, said exactly the opposite in a radio interview on France Info on 14 January. It was not France that had lost credibility with the financial markets, according to Hollande, it was the Sarkozy government’s policies.

Hollande would say that, of course, and the French Government, likewise, would naturally try to downplay the downrating.

Whatever the reasons for the downgrade, Antigone1984 believes that “Black Friday” 13 January 2012 will be seen as the day when Sarkozy lost the presidency. France will henceforth be regarded in financial markets as a second-tier economy and the concomitant humiliation of this once great economic power will be deeply resented by a French electorate already hard-hit by the economic crisis.

Sarkozy is the natural scapegoat. It was on his watch that the downgrade occurred.

The first round of the two-stage presidential election takes place on 22 April 2012; the second, conclusive round on 6 May.

According to the BBC, the French government is conducting a communications campaign to inform the French people that “there is no need to panic”. A sure sign, if any were needed, according to Antigone1984, that the government is itself in a state of panic.

Standard and Poor’s yesterday downgraded nine of the 17 countries belonging to the eurozone. Apart from France, these were: Italy, Spain, Austria, Portugal, Cyprus, Slovakia, Slovenia and Malta. The Austrian downgrade was also from AAA to AA+.

In announcing its downgrades, Standard and Poor’s is quoted as warning that budget discipline and austerity measures were not sufficient to fight the debt crisis and might become self-defeating.

It should be borne in mind, nevertheless, that France still has a top AAA rating from the other two main ratings agencies, Moody’s and Fitch.

The BBC report adds an explanatory note:

“Credit ratings are used by banks and investors to decide how much money to lend to particular borrowers.

“The cut in the so-called sovereign ratings of governments is likely to lead to most other borrowers domiciled in the same countries – including banks and companies – being downgraded.

“Although the move has been widely expected, it is still likely to make it somewhat more difficult and expensive for borrowers from those countries to raise money, including for the governments themselves.”

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