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French PM from Brazil admits new “jolts” can be expected in the Euro zone

Friday, December 16th 2011 - 06:23 UTC
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PM Fillon is on a business visit to Brazil to promote trade and French exports PM Fillon is on a business visit to Brazil to promote trade and French exports

French Prime Minister Francois Fillon said his country is likely to face new “jolts” from the Euro zone debt crisis amid rumors it could lose its triple-A credit rating.

In a speech on Thursday to Brazil's Sao Paulo Federation of Industries, Fillon downplayed the risk of a downgrade, stressing that “what matters is not the judgment on a given day” of rating agencies but “the politically structured and rigorous budgetary trajectory that Europe, that France have decided to adopt”.

“The crisis is not over and it is likely that we will have to face jolts. Markets and rating agencies have their own logic,” he said. “They deal with the immediate, the instantaneous”.

Two agencies, Standard & Poor's and Moody's, have warned that they are putting France and its EU partners' debt under scrutiny, and markets see Paris as likely to drop one or even two rungs on the ratings ladder.

On Monday French President Nicolas Sarkozy appeared to accept that France is facing a downgrade of its triple-A credit rating when he declared that he would overcome this challenge to his policy.

“It would be another difficulty, but not an insurmountable one,” he said in an interview with Le Monde newspaper. “If they decide to take it away from us we'll face the situation with sang froid and calm.”

“What counts more than anything is the credibility of our economic policy and our determined strategy to reduce spending. We will scrupulously honor all the engagements that we have made,” Sarkozy said.

Fillon arrived in Sao Paulo late on Wednesday on the first leg of a four-day visit to Brazil.

Accompanied by three ministers and about 30 French business leaders, he later met with President Dilma Rousseff for discussions on the Euro zone debt crisis, bilateral trade and military sales.

In an interview with Folha de S.Paulo newspaper published on Wednesday, Fillon said that “the stagnation of the European economy can be stopped”, provided the European Union reorganizes itself and sheds its debts.

France is very much interested in winning a 5 billion dollars contract for the renewal of the Brazilian Air Force fighter jets fleet. France’s Rafale fighter jet is competing against the F-18 from Boeing and Sweden’s Gripen NG.

Brazil had delayed the decision several years on budget reasons but is expected to make an announcement on the jet purchase in 2012.

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