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The decline in household consumption has resulted in zero growth of the French economy in the second quarter, a performance-face against which the government reiterated its goals, particularly in terms of deficit reduction.

This stagnation of GDP increases, however, the risks to growth and budget complicates the equation even though France is at the heart of the current turmoil in financial markets.

The first estimate of gross domestic product released earlier today by Insee corresponds to the most pessimistic estimates of Reuters, the median stood at 0.3% ..The Banque de France and INSEE in turn provided an increase of 0.2% of GDP.

The National Institute of Statistics, however, confirmed the growth of 0.9% in the first quarter, which recorded the best performance for nearly five years.

The contrast between the first three months of the year and the next three was mainly due to a relapse of 0.7% of household consumption.

"We find the aftermath of the extinction of the scrappage vehicle," said Jean-Luc Proutat, economist at BNP Paribas."Household spending on manufactured goods had not dropped much since the extinction of 'balladurettes' of 1993."

Another factor detrimental to the overall growth: business investment decelerated sharply to 0.7% in the second quarter after 1.9% in January-March.

The contribution to growth of changes in inventories, which reached 0.8 points in the first quarter has been nil in the second.As for exports, they remained stable after rising 1.8% on the beginning of the year.

"WE take the necessary steps," said BAROIN

"The decline in consumption and stagnant exports create an extremely fragile environment", says Philippe Waechter, director of economic research at Natixis Asset Management.

"The dynamics of French companies is mainly due to investment firms and households.But we feel that if the final demand, consumption and exports, does not restart, this investment will slow, particularly on the business side. "

A restart that for now it hard to place: the surveys of July all confirmed the trend of slowdown and market turmoil in early August should not matters worse.

The Minister of Economy, Baroin, acknowledged that the figure for the second quarter was "somewhat disappointing" but he emphasized better news, also published by INSEE on Friday, as the acceleration of the creation of jobs (68,300 in the second quarter after the first 58,200) and lower consumer prices (-0.4% in July).

"We will be in line with the growth objectives of this exercise," he said on RTL."What you should remember is that whatever changes (…), we will take steps for the appointment of the intangible goals of reducing the public deficit."

A speech immediately criticized by the opposition.

"The complacency of the government and the president will not have long resisted the reality of the situation," said in a statement Michel Sapin, the Socialist Party national secretary of the economy and taxation, noting that "only the decline in imports (-0.9%) prevents the return to negative growth."

DIFFICULT BUDGET EQUATION

Paris still plans to reduce its deficit to 5.7% of GDP this year after 7.1% last year and to 4.6% next year and 3.0% in 2012.From Wednesday, the Elysee Palace announced for July 24 of new fiscal measures designed to meet these objectives "intangible".

These political decisions, which shall include ensuring the maintenance rating of "AAA" enjoyed even France to refinance its debt, are obviously complicated by economic stagnation.

"How to find cures if we want to regain growth and reduce the budget deficit? An equation is difficult to maintain because a phase of fiscal consolidation without abrupt adjustment of an external variable, such as exchange rates, weighs heavily on growth, "said Philippe Waechter.

In his view, the target of 2% growth maintained by the Government for this year is already "extremely difficult" to hold.

A view shared by Jean-Luc Proutat, BNP Paribas' investigations are not as good, the events of August are likely to postpone investment decisions, so growth in France in 2011 can hardly reach 2% " he said.

It now expects a figure closer to 2011 and 1.7% said that "growth in 2012 is in question."

"We will attack in 2012, with growth a little softer," says he said it was "ambitious" the government's target of 2.25% growth for next year.

The Cyprus government on Wednesday presented an austerity plan of 600 million euros to fight against the deficit, the extent of which could force it to seek outside help.

The plan announced by Finance Minister Kikis Kazamias, consists mainly of tax increases and seeks to reduce the public deficit to 2.5% of gross domestic product (GDP) in 2012.

Its adoption is not guaranteed, the new Communist government no longer had a majority in parliament.

The increase in the deficit of Cyprus – 3.47% in first half – and a serious energy crisis pose the threat of use of an international rescue package for the country a member of the euro area.

The authorities will struggle to meet the target this year of 4% deficit, after 5.3% in 2010.

The agency Fitch Ratings said Wednesday it lowered its rating from A-to BBB with negative outlook and expects a deficit close to 7% this year.

The other two major rating agencies also downgraded sovereign Cyprus in recent months, partly due to exposure of local banks to Greek debt and close trade ties between the two countries.

Fitch expects that Nicosia will no longer borrow on the markets before the end of the year and will be the fourth country in the euro area to call an international bailout.

The Finance Minister recently assured that Cyprus did not need such a plan at the moment. But the Central Bank and Bank of Cyprus, the first bank in the country, also fear that the island will be forced.

An aid to Cyprus would be attached, however, the budgets of the 17 members of the euro area, its financing needs up to two billion euros for 2011.The Cypriot economy accounts for 0.2% of GDP in the area.

TAX INCREASES

The main measures of the austerity plan is an increase of two points of VAT at 17%, passing from 30 to 35% of the tax rate for taxpayers earning at least 60,000 euros per year and an increase in taxation bank interest.

"With the cash flow that will allow the adoption of the measures we propose in this first plan, about 600 million (…), the deficit in 2012 will amount to 2.5%" said Kikis Kazamias.

Officials will not be increased for three years and new entrants in the public begin treatment with a lower payroll taxes and stronger, he added.

The centrist Democratic Party, which withdrew from the coalition government last week, have already warned they would vote against these measures to the public. Two weeks ago, negotiations between parties on the austerity plan failed.

The European Commissioner for Economic and Monetary Affairs, Olli Rehn, met with the finance minister after his appointment last week. He said that Cyprus should accelerate structural reforms to boost growth.

Political and economic difficulties of the island have been exacerbated by the explosion of a munitions factory on July 11 that destroyed its main power plant.The bill for the government will be three billion euros, according to opposition parties.

States are responsible for the role, thus destabilizing the rating agencies in global finance, says Gunther Capelle-Blancard, deputy director of CEPII. He said it is not possible to do without, it is necessary to reduce our dependence vis-à-vis them. The rating agency Standard & Poor's has lowered a notch Friday, August 5 sovereign rating of the United States, from "AAA" to "AA +". How the decision of Standard & Poor's sovereign rating to degrade the U.S. Can create such a market panic? Rating agencies are they the new masters of the world?

No, far from it, but in fact blow hot and cold markets, because they give investors what they want: information readable and easy to interpret – in this case a note.In times of great economic uncertainty, as we are currently experiencing – the recovery is it solid or the world economy will plunge into recession it – the markets are focused on the limited information they have in hand, supplied by rating agencies. This is not the S & P decision that caused the depression of awards: they have dropped the last two weeks against the backdrop of political crisis in the U.S. and the debt crisis in the eurozone.

The loss of the triple A U.S. still created an increase in tension, raising fears of a new stock market crash … "Rating agencies are not credible"

Yes, this is precisely what one criticizes rating agencies: to be procyclical, adding to the difficulties of panic rather than to alert ahead of the difficulties of a country.For 15 years, agencies have seen no future crisis: they did not see coming bankruptcy of the States of South America in the 80s or the subprime crisis in 2008, they have not alerted before 2009 State of Greek public finances. They are not credible.

If their decisions are so credible, why do they have so much influence on global finance?

They are the regulators and legislators that gave power to the agencies. When the three agencies were created at the beginning of last century [in 1909 Moody's, Fitch in 1913 and Standard & Poor's in 1941, note], it was a mere agency of financial information. Then they began to assign grades. Successfully. But it was in the 1970s that their role has emerged, when financial regulation took hold of them, making notes distributed by the agency for references.For example, U.S. law requires that certain institutional investors such as insurance companies, securities purchase only highly rated by rating agencies, which are of course part of S & P, Fitch and Moody's. The climax of this oracle status is Basel II. Since 2004, international banking regulations forced banks to hold an equity ratio proportional to the number of shares they hold considered risky by the rating agencies. These prudential rules are de facto given a credit rating agencies as assessors Almighty.

They were also accused of being more conciliatory toward the Anglo-Saxon countries than to the European countries. Are they truly independent? Who pays? "France does not pay for its triple-A"

These accusations are ridiculous, as evidenced by the deterioration of the American note by S & P.These agencies are multinationals, they are stateless. Historically, agencies were paid by investors. But the system was flawed, since these investors could sell their own information. Another new model has been devised: it is the borrowers – businesses, local authorities, banks, etc.. – Who pay the agencies for which they note. However, there are conflicts of interest. They occur in the case of structured products when agencies note that titles themselves have helped to shape – this was the case of securities backed by subprime loans famous. On sovereigns, the states, the rating is primarily a showcase for media agencies.In short: France does not pay for his triple A.

Since the 2008 financial crisis, are they better controlled?

Yes, a set of rules were enacted on both sides of the Atlantic. They include constraints to greater transparency of their rating criteria and conflicts of interests are better supervised.

Can we do without it?

No, it's unthinkable, since they distribute the notes are essential to the financing of the economy. An investor can not lend their eyes closed to a borrower, it needs a basis for assessing its creditworthiness and the cost at which it will lend. This is the service rendered by the rating agencies. And if they are not, this information anyway reappear in another form.However, it is essential to detoxify rating agencies, reducing our dependence vis-à-vis them.

How?

We can not prohibit an agency to distribute notes, contrary to what has Europe [Brussels plans to ban the notation of a state that has a financial assistance program, such as Greece, ed] . The only thing we can do to mitigate the influence is the dereference of texts that regulate international finance, to make it a source of information among others on the situation of a transmitter.

The financial managers of industrialized nations have stepped on Sunday and Monday news to reassure financial markets, frightened by the colossal debts of European countries and the United States.

Monday morning before the opening of the Tokyo Stock Exchange, the finance ministers and central bankers from the G7 issued a statement in which they pledged to take "all necessary measures" to support financial stability and growth.

They say they are determined to act whenever necessary, to ensure liquidity and support the smooth functioning of markets, financial stability and growth.

They reaffirm "our common interest in the international financial system and our strong and stable support for the exchange rate determined by the market" and stressed that excessive volatility and disorderly movements in exchange rates has negative implications for economic stability and financial.

Previously, the European Central Bank (ECB) announced "actively implement" the bond buyback program to try to stem the debt crisis that has shaken the euro area and threatened to spread Spanish and Italian economies.

Monday before a day of crucial markets, the European financial institution did not specify the countries concerned by this acquisition debt but every indication that this may be obligations of Spain and the Italy.

In a statement issued after a conference call late Sunday, the ECB urged Rome to Madrid and set up as quickly as possible measures of fiscal consolidation recently announced by both countries to try to reassure markets .

"On the basis of these estimates that the ECB will implement an active program of redemption of bonds," wrote the ECB.

The absence of bond buyback of Italy and Spain by the ECB to ease prices has been particularly punished by the markets that have seen the sign of internal divisions harmful.

Markets expect the ECB to see begin on Monday the purchase of government bonds in both countries to stabilize their prices.Interest rates in Italy and Spain in recent days jumped to their highest levels in 14 years.

Monday morning, the IMF praised the response of the ECB and the G7.

BERLIN AND PARIS PRESS

In a joint statement issued Sunday a few hours before the end of the ECB meeting, French President Nicolas Sarkozy and German Chancellor Angela Merkel stressed that "a rapid implementation and complete the measures announced is essential to restore confidence markets."

According to South Korea, a conference call Sunday morning brought together financial officials of the G20, which groups the world's major economies, to discuss the situation caused by tension on the debt in the euro area and lower by Standard & Poor's sovereign rating of the United States.

The G20 and the European Central Bank have been active behind the scenes to assess the consequences of the debt crisis on both sides of the Atlantic, shaking financial markets and fears of a relapse of Western countries into recession .

After heavy turbulence in global financial markets, which have lost about 2.500 billion dollars over the past week, European and American leaders find themselves again forced to reassure investors about the ability and determination of their countries to reduce deficits and public debts.

PANIC IN THE GULF AND ISRAEL

Saudi Stock Exchange, the largest in the Arab world, has faltered on Saturday, falling from 5.5% to a low of five months before showing a small increase of 0.08% at the end of Sunday.

But it was in Tel Aviv that the decline was most pronounced with a fall of 6.99% recorded by the TA-25 index in Israel.The TA-100, wider, has meanwhile shrunk by 7.2%.

An extension of the crisis in Italy or Spain, after the bailouts granted to Greece, Ireland and Portugal, in the eyes of observers would require a strong increase in lending capacity of EFSF, equipped for time of 440 billion euros.

Quoted by the weekly Der Spiegel, the German government experts doubt that Italy could be re-floated by the EFSF even if the fund saw its capacity threefold, because the needs of Rome are in their too great.

United States, the lowering of the sovereign rating has been denounced by the Treasury, which held that the rating agency "forgot" 2000 billion in budget savings in its calculations.

In Washington, an economic adviser to the White House deplored the decision by S & P to degrade the rating of U.S. debt from AAA to AA +, which could ultimately affect all markets by increasing the cost of borrowing and undermining the prospect of sustainable recovery.

Asian allies of the United States, Japan and South Korea have renewed their confidence in U.S. Treasury bills, may lose value.

Standard and Poor's downgraded Friday the debt rating of the United States, a historical first that will boost the stock market panic. In the short term, however, the effects will be limited. In the longer term, however, the entire global economy could be affected. Explanations. The rating agency Standard & Poor's has lowered a notch Friday, August 5 sovereign rating of the United States, from "AAA" to "AA +".

Thunder for the U.S.: Standard and Poor's downgraded a notch Friday note of the U.S. debt, a "AAA" to "AA +". This is a historic first for the country, which enjoyed the highest rating possible from the creation of the rating agency in 1941. The impact of the loss by the world's largest economy with his seal of excellence is still difficult to assess and be ambushed near the reopening Monday of the financial markets in turmoil.But given the place of the United States in the global economy – the first power with an annual GDP of over 14 500 billion dollar seen as a safe haven because it is the main reserve currency exchange, the decision of S & P could be devastating.

Why S & P downgraded the sovereign rating of the United States?

Standard and Poor's justified its decision by the plan, "insufficient" in his view, the fiscal consolidation American, voted this week to help raise the debt ceiling by more than 14,500 billion of the country he and avoid default payment. It also warned that it did not exclude a further deterioration in the future."The plan for balancing the budget on which Congress and the Executive have recently agreed is insufficient compared to what, in our view, would be needed to stabilize the dynamics in the medium term public debt" , said the rating agency. Standard and Poor's warned in April that it was considering lowering, given the persistently high budget deficit and rising public debt. The unfolding conflict of budget debates in the coming months, which culminated Tuesday in extremis on raising the legal limit of public debt, had only compare this perspective. John Chambers, President of the Evaluation Committee of S & P, said Friday on CNN that Washington could have prevented the lowering of the notes within the ceiling earlier.He said the responsibilities were shared by the Administration and Obama, but also to "the previous administration."

What does that have?

"AAA" is the best possible rating awarded by the rating agencies. Benefit means a guaranteed return on investment at 100%. So lend money to countries rated triple-A no risk. The fact that the sovereign rating of the United States no longer enjoys the "AAA" means that lending to the United States is no longer safe. In theory, there exists a possibility that the United States do not pay their creditors. This possibility, however, is to minimize, as the country still enjoys the highest rating by the two other major financial agencies, Fitch and Moody's – even if it put the U.S. debt under negative outlook and could soon follow his colleague S & P.In short: give the United States now has a higher risk.

Consequences for the United States?

Analysts remain cautious over the weekend. All await the opening of financial markets Monday. A lowering of the sovereign rating of a state implies a higher interest rate that state borrowing, so a heavier debt burden. This is very theoretical because the example of Japan, degraded twice – his bill went from "AAA" to "AA" – proves the opposite: the Archipelago, whose debt reached 200% of GDP today to borrow very low cost. However, the loss of triple-A by the United States could lead to an increase of 0.5 point interest rate borrowing in the country according to JP Morgan, is an additional cost of the debt burden of $ 100 billion .Such an increase could have adverse consequences on the entire U.S. economy: even if the U.S. Treasury said on Friday that the loss of triple A would not result in a devaluation of the value of sovereign bonds, thus increasing the cost refinancing of U.S. banks in the interbank market, it is likely that the cost of credit to consumers in the United States increases. Bad news for U.S. growth, which is mainly based on household consumption and showing signs of weakness. What is certain is that the U.S. will continue to support the markets without difficulty, although this must be done at a higher cost. The U.S. Treasury is in fact the investment vehicle most prevalent in the world.

And the global economy?

The loss of the AAA American is likely to destabilize the entire global economy. Because the United States are the main driver, because the dollar is at the heart of the international financial system. The U.S. Treasury is in fact the investment vehicle most prevalent in the world. The total amount of "Treasures" held by foreign investors (governments, central banks, banks, insurers, etc..) Reached more than 4.5 trillion dollars in late 2010. The loss of "AAA", indicating that the U.S. debt is no longer safe, would lead to a devaluation of the value of Treasury bonds, so the asset portfolio of most international financial players. Except that the dominance of the dollar in the global economy mitigates the negative effects of this degradation.Indeed, no money is likely to come replace the dollar in international reserves in the short term. Even China, the first creditor of the United States with some 1,160 billion of U.S. Treasury bills, can not do without the dollar in the short term. "It would be difficult for China to diversify at the expense of buying U.S. debt without a radical change all its business model," said Alistair Thornton, an analyst at IHS Global Insight. "There is no other market liquidity as important as the United States," he adds, explaining the massive purchases by China of U.S. debt.China "has very few options for investing in international markets its massive foreign exchange reserves," confirmed Zhentao Yin, the Academy of Social Sciences.

What about the "AAA" from France?

"It's hard to imagine that after the USA downgraded, Standard & Poor's will not continue its policy of no deterioration of other members of the club's" AAA "sovereign," the Financial Times. Yet among the 15 remaining members of this club, France is by far the most fragile. Tricolor debt reached almost 86% of GDP and does not flow back before 2014, according to government projections. The presidential election of 2012 makes it uncertain forecasts of deficit reduction, even if the PS leaders have pledged to meet the objectives set by the current government. "France is definitely the weak link of the club's Triple A", assign analysts polled by L'Expansion. Com.A deterioration in the sovereign rating of France would have catastrophic consequences for the entire euro zone, whose stability is already threatened by a debt crisis.

The United States will soon be able to recover their "AAA"?

"Once a country has lost its triple A, it is difficult to recover," warns John Chambers, President of the Evaluation Committee of S & P. It is possible but very difficult to regain the highest rating possible, as shown by Canada or Australia. Canada, which had lost its "AAA", no one has returned 2002 quen. Debt in Canadian dollars however always been rated "AAA" since its inception, ie since 1992.Similarly, three Scandinavian countries also known for their ability to consensus politics have seen their efforts to improve public finances crowned by the return of a "triple A" lost year 1990: Denmark 2001, Finland in 2002 and Sweden in 2004. Australia is one model may be more difficult to imitate. This country has lost in the 1986 "AAA" rating assigned to its foreign currency by S & P, to find him in 2003. During these 17 years, Canberra has demonstrated fiscal discipline inflexible, stopping in 1997 to increase the amount of its debt in dollars. "I think from the time when the United States have lost their triple A, it's forever," concludes the analyst to Reuters Felix Salmon.

The Franco-Belgian bank Dexia announced Thursday the heaviest loss in its history, a performance due to both the sale of a portfolio of toxic assets – centerpiece of its restructuring plan – and its contribution to the plan help on Greek sovereign debt.

The bank posted a loss of 4.032 billion euros in the second quarter, well above the 3.3 billion lost in all of 2008 at the height of the financial crisis.

Analysts polled by Inquiry Financial Europe on average expected a loss of 3.640 billion euros.

Dexia, whose share price is currently flirting with historic lows, had already warned in late May that the sale of risky assets would result in costs of 3.6 billion euros in the second quarter.

His participation in the private sector's contribution to the plan of aid to Greece was also weighed to 338 million euros.

At about 1.65 euro per share, market capitalization of the bank reached about 3.2 billion euros.

Dexia has already warned that it would not pay a dividend for 2011, a period in which it intends to continue its restructuring.

Saved from bankruptcy in fall 2008 with a bail granted by the Belgian, French and Luxembourg, Dexia has since been forced by the European authorities to dispose of numerous subsidiaries.

Silvio Berlusconi, forced to speak to the soaring cost of debt of Italy, was Wednesday praised the economic health of Italy, regretting that markets do not take into account.

"The country is strong economically and financially," said Board President before the deputies in a speech intended to reassure the markets.

Berlusconi has pledged to work with unions and employers to reform the labor law and accelerate growth, calling for a cohesive whole nation to overcome this crisis.

Chiara Corsa, economist at Unicredit, has retained his outstretched hand to the unions and the opposition but considered too vague speech the head of government.

"I had no great expectations but the content is still quite disappointing," she said. "He has shown no willingness to move forward austerity measures next year, what we hoped and that markets would have liked."

Italian bond yields rose to 10 Wednesday to its highest level in 14 years.The market is now also skeptical about the ability of Rome to meet its deadlines as that of Madrid.

The savings plan of 48 billion euros, to eliminate the deficit in 2014, did not convince the markets, stressing that most of the measures will take effect in 2013, after the next election and they will not help stimulate growth.

"Patriotism"

The European Commission has assured that no discussion was held regarding an assistance plan for Italy.The Italian Minister of Economy, Giulio Tremonti, and Eurogroup President Jean-Claude Juncker, was uncommunicative at the end of a two-hour interview in Brussels.

José Manuel Barroso, President of the European executive, said that the onset of fever did not reflect the true state of Italy and Spain, third and fourth economies in the euro area.

This is essentially what Silvio Berlusconi wanted to demonstrate to the Chamber of Deputies.

"As often in the crises of confidence, the markets do not assess properly the merits of our credit system (…), The strength of our banking system, the sound basis of the assets of our families and businesses, limited external debt, lack of balance in the property sector and our fiscal prudence during the crisis, "he said.

"The markets have not reflected and still do not reflect the importance of interventions (EU). It is therefore essential to give guarantees to markets," added the "Cavaliere".

Silvio Berlusconi spoke vaguely of the reforms and called for a "broad political and social consensus to fight the threats to our financial stability."

The urgency is, as the head of government, to find a strong and to adopt a tax reform.Thursday he will meet the social partners to present a plan to reform the labor law.

With a narrow majority in the Chamber of Deputies, Berlusconi relayed the call to unity of President Giorgio Napolitano. "I will not be deaf to the ideas of the opposition if they are inspired by a patriotic spirit," he said.

The major European stock markets are up sharply Monday after the agreement reached in extremis in the United States on raising the U.S. debt ceiling.

At 9:11, the CAC 40 advanced 1.35% to 3720.87 points, after falling more than 4% last week.

Places in London and Frankfurt rose by 1.07% and 1.5%, while European indices FTSEurofirst 300 and Eurostoxx 50 earned 0.9% and 1.29%.