UPDATE 1-Moody’s to review France’s outlook over next 3 mths
NEW YORK Oct 17 (Reuters) - Moody’s warned on Monday it
may slap a negative outlook on France’s Aaa credit rating in
the next three months if the country fails to make progress on
crucial fiscal and economic reforms.Moody’s also will take into account any potential adverse
developments in financial markets or in the economy in
assessing the outlook, it said, noting that the government has
now less room to stretch its finances than it did during the
financial crisis of 2008.A negative outlook would be a sign that Moody’s could
downgrade France in the next couple of years.”The deterioration in debt metrics and the potential for
further contingent liabilities to emerge are exerting pressure
on the stable outlook of the government’s Aaa debt rating,”
Moody’s said in a statement.The warning comes as European Union leaders discuss
measures to protect the region’s financial system from an
expected Greek debt default. Those measures should include
injection of capital into banks with exposure to Greek debt.France may face a number of challenges in the coming
months, such as the need to provide additional support to other
European countries or to its own banking system, Moody’s said.For France to maintain a stable outlook on its rating, it
will need to prove its “continued commitment to implementing
the necessary economic and fiscal reform measures,” the ratings
agency said.The government will also have to show “visible progress in
achieving the targeted sustainability improvements” in its debt
ratios, Moody’s said.France’s debt metrics are now among the weakest of its Aaa
peers, the agency said.
UPDATE 2-China unveils steps to ease credit crunch for small firms
* Analysts say the move does not mark any policy shiftBEIJING, Oct 12 (Reuters) - China on Wednesday unveiled a
set of measures to expand financing supports for cash-starved
small businesses, a step signalling some relaxation of credit
controls but not amounting to a fundamental shift in monetary
policy.The steps, including allowing small companies to issue more
bills and bonds while paying less taxes, were announced on the
government’s web site (www.gov.cn) after a cabinet meeting
presided over by Premier Wen Jiabao.Small banks will continue to implement “relatively” low
reserve requirement ratios (RRR) compared with big banks, the
cabinet said, falling short of announcing a cut in RRR as
expected by some investors.China’s RRR for big banks now stands at 21.5 percent, and
the ratio for smaller banks, which tend to be more focussed on
financing smaller firms, is 19.5 percent or even lower.”Currently, some small- and micro- sized firms are facing
operating difficulties and the problem is also that they are
facing a heavy tax burden and finding it hard to get finance,
all of which we need to give high attention to,” said a cabinet
statement.The government will raise the threshold for levying
value-added and business taxes for such firms, easing their
burdens.Despite the move, analysts believe the government will
refrain from easing monetary policy in the near term for fear of
reigniting inflation pressures.Guo Tianyong, an economist at Central University of Finance
and Economics in Beijing, said the move should be seen as a
“targeted” easing of credit curbs, rather than an
across-the-board policy easing, given inflation remains
elevated.Small firms hold the key to a stable job market in China as
they account for 75 percent of employment.”It is far-fetched to read these measures as a signal of
Beijing relaxing its macro policies,” said Qiao Yongyuan, an
analyst at CEBM in Shanghai.”It is a set of detailed guidelines concerning more about
providing support for smaller firms and regulating private
financing,” he added.China’s annual inflation pulled back to 6.2 percent in
August from July’s three-year high, cementing expectations that
Beijing will hold off further policy tightening amid
uncertainties hanging over the global economic recovery.Since last October, the central bank has raised interest
rates five times and increased bank reserve requirement ratios
— the percentage of cash deposits they must set aside in their
vaults — nine times.The State Council, or cabinet, also vowed to step up a
crackdown on the high-interest underground lending market.Cash-strapped Chinese private firms have struggled to win
bank loans during a credit clamp-down by Beijing, often forcing
them to borrow on the underground markets that pool money from
individuals and firms — at annual interest rates as high as 100
percent.The eye-watering rates, more than 15 times China’s benchmark
lending rates, have pushed some firms to the limit. And a string
of private company bosses in China’s entrepreneurial capital,
Wenzhou in coastal Zhejiang, have skipped town after failing to
repay such loans.
