As anxious investors who have been shaken by Europe’s debt problems scrutinize France’s debt, the France country-specific exchange traded fund may improve on the greater role the government will take in businesses.
French President Nicolas Sarkozy has vehemently asked banks to boost lending to the economy and particularly toward small companies, reports Emma Vandore for The Associated Press. Additionally, Sarkozy stated the government will “completely overhaul its shareholders’ role” and begin to take a greater hand in state-owned companies to better represent the government’s interests.
French banks have pledged to increase credit available to small- and medium-sized companies by 3%, or $130.47 billion, report Gabriele Parussini and Jethro Mullen for The Wall Street Journal.
Meanwhile, wary investors are arguing that the cost of France’s bonds, along with the cost of insuring them, does not reflect the country’s actual indebtedness, writes Jeremy Gaunt for Reuters. The French deficit will reach 8.2% of GDP this year, about a 50-year high. Total debt is estimated to hit 83.2% of GDP.
Observers note that the fiscal problems in France and the true cost to eurozone economies of possible bailouts are not priced into France’s sovereign debt. The experts believe that French bond yield spreads over the German Bunds will likely increase. France’s 10-year bond yield offers around .30% over benchmark German Bunds.
iShares MSCI France Index (NYSEArca: EWQ)
Max Chen contributed to this article.