Sept. 14 - French Industry Minister Eric Besson says the country's banks are solid despite a downgrade in the credit rating of two of them and slams what he describes as rumor-driven markets. Kirsty Basset reports.
The downgrade of Credit Agricole and Societe Generale did not come without warning. Ratings agency Moody's had been expressing concern about French banks for some time. Their exposure to Greek debt being the main problem. Alain Crozat is from Montsegur Finance. (SOUNDBITE) (French) PRESIDENT OF MONTSEGUR FINANCE, ALAIN CROZAT, SAYING: "This cut could have consequences on their abilities to finance themselves. They will pay a little more because of the cut in the rating. It's a more expensive financing cost, but it was already priced into the market." BNP Paribas has also been placed under review. But Moody's says it has enough capital to support its Greek, Portuguese and Irish exposure. France's Industry Minister blamed rumour-driven financial markets for the downgrade. Eric Besson told French television the speculation was "totally irrational" and pointed out that just two months ago the French banks had passed the so-called stress tests. (SOUNDBITE) (French) INDUSTRY MINISTER ERIC BESSON SAYING "The French should not be worried. French banks are solid, they are solvent, they have reduced their exposure to Greek debt, there is no need to worry." The downgrade comes as alarm over the debt crisis continues to grow. China and the United States are both urging Europe's leaders to take more decisive action. But investors are becoming increasingly skeptical about their willingness to do so. Credit markets now suggest there's a 90 percent chance of a Greek default. Only then will investors find out for sure how exposed French banks - and many others in Europe - really are. Kirsty Basset, Reuters.