S&P says Franco-German fiscal plan promising

Tue Dec 6, 2011 6:58pm EST
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By Walter Brandimarte

NEW YORK (Reuters) - A plan by France and Germany to increase fiscal integration in Europe is "promising" and could help avoid a mass debt downgrade of euro zone countries by Standard & Poor's, a director with the ratings agency said on Tuesday.

Frank Gil, senior director of European sovereign ratings at S&P, said Friday's crucial EU summit could be considered successful if leaders came up with "some indication" they have a strategy to spur economic growth and share fiscal and financial risks.

"There could be, at least what we heard already from the French and the Germans looks potentially promising: a shift toward some sort of fiscal transfer, some sort of fiscal sharing," he said in an interview with Reuters Insider.

John Chambers, chairman of S&P's sovereign ratings committee, also said greater fiscal union in the euro area would "be supportive of ratings."

"It would put finances of the union on a better footing, and would better align the monetary policy with the fiscal policy," Chalmers said in a separate interview with Reuters Insider.

To watch Gil's interview: tinyurl.com/7944gsc

To watch Chambers' interview: tinyurl.com/887wxqv

S&P on Monday issued an unprecedented warning that it could downgrade nearly all euro zone members, including top-rated countries such as Germany and France, if leaders fail to reach an agreement on how to solve the region's debt crisis.   Continued...