Fitch Ratings has downgraded Russia’s Long-term foreign and local currency Issuer Default Ratings (IDR) to ‘BBB-‘ from ‘BBB’. The issue ratings on Russia’s senior unsecured foreign and local currency bonds have also been downgraded to ‘BBB-‘ from ‘BBB’. The Outlooks on the Long-term IDRs are Negative. The Country Ceiling has been lowered to ‘BBB-‘from ‘BBB’. The Short-term foreign currency IDR has been affirmed at ‘F3’.

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OVERVIEW

  • In our view, Germany has a highly diversified and competitive economy with a demonstrated ability to absorb large economic and financial shocks.
  • Germany also benefits from low interest rates, which help lower sovereign borrowing costs in the medium term.
  • We are affirming our unsolicited ‘AAA’ long-term and ‘A-1+’ short-term sovereign credit ratings on Germany.
  • The stable outlook reflects our view that Germany’s public finances and strong external balance sheet will continue to withstand potential financial and economic shocks.

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OVERVIEW

We are reviewing our assessment of Russia’s monetary flexibility and the impact of the weakening economy on its financial system. As a result, we are placing our long-term sovereign credit ratings on Russia on CreditWatch with negative implications. We expect to resolve the CreditWatch upon the conclusion of our review, which we expect by mid-January.

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London, 12 December 2014

Fitch Ratings has downgraded France’s Long-term foreign and local currency Issuer Default Ratings (IDR) to ‘AA’ from ‘AA+’. This resolves the Rating Watch Negative (RWN) placed on France’s ratings on 14 October 2014. The Outlooks on France’s Long-term ratings are now Stable. The issue ratings on France’s unsecured foreign and local currency bonds have also been downgraded to ‘AA’ from ‘AA+’ and removed from RWN. At the same time, Fitch has affirmed the Short-term foreign currency IDR at ‘F1+’ and the Country Ceiling at ‘AAA’.

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OVERVIEW

  • The United Kingdom has high monetary, labor, and product-market flexibility, and a wealthy and diversified economy.
  • Output and employment growth have exceeded our previous projections, but the U.K.’s fiscal position has underperformed our expectations and has yet to reflect a strengthening economy.
  • We are affirming our ‘AAA/A-1+’ long- and short-term sovereign credit ratings on the U.K.
  • The stable outlook reflects our assumptions that the U.K. fiscal position will gradually strengthen as real-wage and productivity growth improve toward pre-crisis averages, and that the government that emerges from the May 2015 general election will remain committed to fiscal consolidation.
    Our outlook also assumes the U.K.’s ongoing EU membership.

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OVERVIEW

  • We have revised our average real and nominal GDP growth projections for Italy over the 2014-2017 forecast horizon down to 0.5% and 1.2%, respectively, from 1.0% and 1.9%, as persistently low inflation and a difficult business environment continue to weigh on Italy’s economic prospects.
  • In our opinion, Italy’s weak real and nominal economic prospects have undermined public debt dynamics more than we forecast in our June 6, 2014 report. In absolute terms, we now estimate Italian general government debt will be €2.256 trillion by year-end 2017, which is €80 billion higher (or 4.9% of estimated 2014 GDP) than we forecast in June.
  • Under our criteria, such a large increase in debt, combined with consistently low growth and eroded competitiveness, are not commensurate with a ‘BBB’ rating.
  • We are therefore lowering our long- and short-term sovereign credit ratings on Italy to ‘BBB-/A-3’ from ‘BBB/A-2’.
  • The stable outlook reflects our expectation that the government will gradually implement comprehensive and potentially growth-enhancing structural and budgetary reforms, and that household balance sheets will remain strong enough to absorb further increases in public debt. We also assume the European Central Bank’s monetary policy stance will continue to support a normalization of inflation in Italy and its key eurozone trading partners.

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