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Is France the Next Greece? ^ | November 11, 2011 | Mike Shedlock

Posted on 11/11/2011 6:46:32 AM PST by Kaslin

On January 7, long before Italy was in the spotlight of mainstream media attention, I wrote Italy The Invisible Elephant.

It was five or six months before Italy became an uncloaked popular economic topic.

However, "elephant hunting" is now a popular sport and mainstream media has done a better job at spotting the next one (with help of S&P threats to France's AAA rating of course).

Elephant Spotting Articles

San Francisco Chronicle: France Plans EU7 Billion in Taxes, Cuts to Save AAA Rating

France unveiled tax increases and spending cuts amounting to 7 billion euros ($9.6 billion) for next year to defend its triple-A rating as growth slows and Europe's debt crisis deepens.

The country will increase some levies on large companies, push up the lower end of its range of value-added taxes and curb welfare spending, Prime Minister Francois Fillon said today.

"French people must roll up their sleeves," Fillon said at a press conference in Paris. "We have one goal: to protect the French people from the severe difficulties faced by some European countries."
Los Angeles Times: Eurozone debt jitters creeping into French bonds

The European debt crisis has gone from bad to worse as Italian government bond yields have soared, threatening the solvency of the Eurozone’s third-largest economy.

But things could go from worse to worst if bond yields keep rising in France, the continent’s No. 2 economy after Germany.

The French government knows it can’t afford for the bond market to turn on it. Paris announced a new round of spending cuts last week aimed at ensuring that the country holds on to its coveted AAA credit rating.

Moody’s Investors Service warned last month that it might put a negative outlook on France’s top-rung rating if Paris made too many commitments to back up its banks or other Eurozone states with tax dollars.

But France’s need to protect itself also raises doubts about its ability to extend help to Italy as Rome’s debt nightmare worsens.
Ah yes, how can you save Greece and Italy if your concern is to save yourself?

The answer is you cannot and a quick look at sovereign debt spreads will show the bond market is starting to figure that out.

Sovereign Debt Table France vs. Germany

Duration Germany

France Spread
2-Year 0.38 1.61 1.23
3-Year 0.51

1.81 1.30
5-Year 0.94 2.46 1.52
10-Year 1.78

3.47 1.69

To help put that spread table into perspective let's look at today's action in 10-Year and 2-Year government bonds.

France 2-Year Government Bonds

France 10-Year Government Bonds

Germany 2-Year Government Bonds

Germany 10-Year Government Bonds

The two-day move in French bond yields vs. German is likely a 6-sigma event. Today alone, the 2-year yield rose 27 basis points vs. 2 for Germany.

Unfortunately the chart does not reflect this because Bloomberg charts are hopelessly a day out of sync with the numbers posted left of the chart.

While the equity markets are cheering the Rise of the Borg (and also the ECB stepping into the fray as the buyer of last resort of Italian bonds), a new elephant, completely visible, stepped into the room.

TOPICS: Business/Economy; Editorial; Foreign Affairs
KEYWORDS: catholic; discussion; shtf; teotwawki

1 posted on 11/11/2011 6:46:34 AM PST by Kaslin
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To: Kaslin

France owns a ton of Italian debt. Italy goes down France goes down.

2 posted on 11/11/2011 6:48:56 AM PST by traderrob6
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To: Kaslin

France is to Greece as Texas is to Rhode Island.

It will be many many many times worse.

3 posted on 11/11/2011 6:54:14 AM PST by Buckeye McFrog
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To: Kaslin

France and Germany are both in terrible fiscal shape. They can continue until investors stop buying low yield bonds, but neither have any better chance of actually paying off their debt than Italy.

4 posted on 11/11/2011 6:58:18 AM PST by wolfman23601
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To: Kaslin

No....they’re the next bunga bunga. Sorry, I plagiarized Paul Krugman. Where’s my nobel prize?

5 posted on 11/11/2011 7:01:12 AM PST by blueunicorn6 ("A crack shot and a good dancer")
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To: wolfman23601

I don’t think Germany is, at least not yet

6 posted on 11/11/2011 7:21:27 AM PST by Kaslin (Acronym for OBAMA: One Big Ass Mistake America)
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To: Kaslin

german debt ratios are modest compared to the rest.

7 posted on 11/11/2011 7:27:22 AM PST by ken21
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To: Kaslin

Could it be SOCIALISM?

8 posted on 11/11/2011 8:10:26 AM PST by Voltage
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To: Kaslin; ex-Texan

When France goes down the financial drain, the corrupt E.U. system will collapse, but Germany will retain the remaining economic power in Europe.

9 posted on 11/11/2011 8:16:20 AM PST by M. Espinola (Freedom is never 'free'.)
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To: Buckeye McFrog

It will be especially worse to see the reactions of the immigrants when their welfare payments are eliminated. Paris will be burning.

10 posted on 11/11/2011 8:20:46 AM PST by MSF BU (YR'S Please Support our troops: JOIN THEM!)
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To: Kaslin
Italy is in defacto default due to lack of willingness to cut spending and privatize, and our US dollar will continue to fall over the long run due to balancing with globalism in business (manufacturing, exports). And there's our own US debt. Oil is rising over the long term and for a long time because of Iran's nukes.

France cuts frantically as Italy nears debt spiral
The Telegraph ^ | 11/7/2011 | Ambrose Evans-Pritchard

Excerpt of Excerpt:
"France has unveiled the toughest austerity measures since World War Two despite the looming danger of a double-dip recession, vowing to slash borrowing by €65bn over the next five years in a last-ditch effort to save the country's AAA rating."

11 posted on 11/11/2011 8:24:54 AM PST by familyop (We Baby Boomers are croaking in a noisy avalanche of rotten politics smelled around the earth.)
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To: Kaslin

12 posted on 11/11/2011 8:26:49 AM PST by Iron Munro (One Trillion seconds = 31,709 years. One Trillion dollars = 3 Months of Obama Spending)
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To: Kaslin

Don`t worry about any crash, it`s not gonna happen.

The ELITES, the SOCIALISTS in charge, will create WW III before allowing a complete economic collapse.

Book on it.

13 posted on 11/11/2011 8:45:34 AM PST by Para-Ord.45
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14 posted on 11/11/2011 9:01:45 AM PST by TheOldLady (FReepmail me to get ON or OFF the ZOT LIGHTNING ping list)
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