The mad scramble to save the euro

Despite President Sarkozy’s best efforts to stave off a total economic collapse, Reuters has just reported that France will likely join the US in losing its AAA credit rating.

The news agency recently conducted a snap survey with 13 top economists. Their verdict:

“Eleven of them think France will be downgraded by one of the major ratings agencies within the next three months.

The only question, following this week’s blanket euro zone credit warning by Standard & Poor’s, is whether France will be cut by one notch to AA+ or by two to a straight AA.

“If you apply Standard and Poor’s methodology based on quantitative factors, France should already have a AA rating, as should the U.S. and Britain,” said Jean-Christophe Caffet, economist at investment bank Natixis.

He noted, however, that ratings agencies take into account subjective criteria, such as the credibility of the government’s budget plans, making it difficult to estimate the final outcome.”

This news comes in the midst of a critical euro summit, which Sarkozy has vowed not to leave until a solution is reached. The Telegraph reported on a proposed plan to save the euro:

“Details of the proposals from French President Nicolas Sarkozy and German Chancellor Angela Merkel are due to be presented to European Council President Herman Van Rompuy in a letter today.

The “Merkozy” grand plan, which proposes a new EU treaty that will impose penalties on eurozone states that exceed deficit targets, was given the backing of the United States.

Timothy Geithner, the US Treasury Secretary, following a meeting with French Finance Minister Francois Baroin this morning, said: “I have a lot of confidence in what the president of France and the minister are doing, working with Germany to build a stronger Europe.”

What do you think? Is there any hope for the eurozone?

Read more about our take on the euro in the latest issue of Carnet Atlantique.

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