Halister News

(Bloomberg) -- French economic fundamentals remain fragile despite improvements in some leading indicators and risks are skewed to the downside, Roubini Global Economics analyst Paulina Argudin writes in note to clients.

• Low growth, rising public debt, lack of fiscal space, institutional and political constraints threaten country’s creditworthiness, making France a potential candidate for a rating downgrade
  • Roubini’s assessment suggests France’s fundamentals are in line with a rating of A-, three notches below the average among main rating agencies of AA
  • Roubini expects a rating move to occur in next 12 months; if a downgrade occurs, yields could rise
• Greek sovereign risk has declined markedly over the past year, as internal price adjustments, euro depreciation helped the economy regain competitiveness
  • Roubini’s model points to rating upgrades from Fitch or Moody’s in next 12 months if Greece gets through first review of its latest bailout program with some kind of an agreement on debt relief
    • In that event, Greek CDS and sovereign yields would probably decline
  • If review does not go smoothly, Roubini expects euro volatility, resurgence of “Grexit” fears
• NOTE, Earlier: VR Capital’s Deitz Likes Greek Bank Stocks, Government Debt