January 13, 2012

AA+ for France: C’est La Vie?

Veronique de Rugy

George Gibbs Chair in Political Economy
Summary

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Mercatus scholars on the possible French credit downgrade:

Veronique de Rugy: "A French downgrade would cut the Eurozone’s lending capacity by hundreds of billions of dollars, and significantly increase the probability that Greece will face a messy default on its debt. This, in turn, could have serious consequences for the very existence of the Eurozone.

"The United States, in the short term, can expect much of the capital invested in Europe to flee for safety here. However, this will only last as long as the United States is perceived to be a safe haven in comparison to the rest of the world – and there’s no telling how long or short that timeline will be."

Anthony Sanders: "For the most part, a French downgrade has been fully anticipated. That is, all their massive spending and debt haven’t miraculously disappeared.

"We have known for awhile that real GDP forecasts for 2012 and 2013 are terrible. Nothing will be released by S&P today that wasn’t known all along: the Eurozone has enormous debt and now a recession on top of it."