France Next On Debt Watch

13 Mar

From the Globe and Mail (UK), via Reuters:

French debt looks set to come under pressure in the near future with investors battered by the Greek crisis arguing it is pricey and does not reflect France’s growing indebtedness.

As a result, other euro zone paper, including Germany’s and — perhaps surprisingly — Italy’s, could be in for a filip.

The gist is not that France’s economy is under any immediate Greece-like default stress, but the cost of its bonds — and the cost of insuring them — does not properly reflect what stress is actually there.

“France has been lumped as a core euro zone economy. To our mind the budgetary situation is not as good as the pricing suggests,” said Richard Batty, an investment director at Britain’s Standard Life Investments.

“It is being priced as though there isn’t a budget problem,” he said.

In it latest note, Mr. Batty’s firm said it was being put off French debt because its fiscal problems and the true cost to euro zone economies of any bailout of peripheral economies are not fully priced in to its debt.

This echoes the view of a number of other fund managers and bank analysts.

Less than a week ago, famous international financier George Soros warned that the Euro currency ‘may not survive’ the Greek debt crisis contagion in the Eurozone.

Others fear that the UK will be the next to fall thanks to its enormous debt levels.

Meanwhile, in Australia our financial authorities remain seemingly oblivious to the dangers from every quarter of the globe. They are still advising the government that we will simply sail out of the Rudd Government’s massive debt, on the back of a multi-decade China-fueled mining boom.

More evidence emerges almost daily, that this new China boom is no more than a hopeful fantasy, that will collapse possibly as soon as 2012.

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