France talks up banks, Greek rescue after downgrade

The French government struggled to reassure markets Wednesday after Moody’s ratings agency downgraded the Société Générale and Crédit Agricole banks. And the government pledged to do everything necessary to prevent Greece leaving the eurozone.

Reuters/Benoit Tessier/Files

French banks “are not in danger”, European Affairs Minister Jean Leonetti told France 2 television after Moody’s cut the banks ratings by one point each.

With French banks heavily exposed to Greek debt, he insisted that they had enough reserves to weather the crisis.

And, Leonetti insisted, Greece will not quit the euro.

“The Greeks would lose 30 per cent of their purchasing power […] the eurozone would suffer a domino effect which would mean that tomorrow speculators would attack Spain, then Italy and why not Portugal?”

President Nicolas Sarkozy and Prime Minister François Fillon will “do all that needs doing to save Greece”, government spokesperson Valérie Pécresse said after the weekly cabinet meeting Wednesday.

But Sarkozy will insist that Greece must show its commitment to a new rescue package, she added ahead of a three-way telephone conference between the French president, German Chancellor Angela Merkel and Greek PM George Papandreou.

The euro eased against the dollar and the volatile markets in Paris and Milan rallied ahead of the call, apparently hoping that it will lead to decisive measures.

Chinese Prime Minister Wen Jiabao offered “a helping hand” if Europe acted to clear its debts at a World Economic Forum session in the Chinese port of Dalian.

But, Wen added, global economic recovery will be “long” and “difficult”.

Europe is in danger and could even face new wars, Polish Finance Minister Jacek Rostowski, whose country currently chairs EU meetings, told the European Parliament in Strasbourg Wednesday.

"If the eurozone breaks up, the European Union will not be able to survive," he said.

European Commission head Jose Manuel Barroso described the crisis as "the most serious challenge of a generation”.

“This is a fight [...] for the economic and political future of Europe,” he declared.