France succumbs to Contagion

The spread between French and German bonds hit a euro record of over 100 basic points this morning, read here, while the stocks of french banks continued their recent retreat. A quote from that report:

“If the EFSF is expanded, it would increase the contingent liabilities for AAA guarantor states like France and Germany, which would be good for the periphery but not necessarily that good for stronger euro countries,” said Elwin de Groot, senior market economist at Rabobank Nederland in Utrecht, Netherlands. “You can see the market’s concern in the spreads.”

All the more worrying it must therefore be for those in Paris to read of this report from Reuters, suggesting the rating outlook for France is under review by Moody's.

More reading on contagion and Deutsche Bank, from The Slog, linked here.