France

France and Germany on Wednesday increased the pressure on their euro-zone peers to improve fiscal discipline in the bloc with a proposal to cut off the region's wayward spenders from key European Union transfer funds, The Wall Street Journal reported. The proposal marks an effort to boost fiscal discipline across the euro zone by giving countries incentives to rein in spending and cut their budget gaps. But the idea is controversial and could be difficult to enforce, as well as to sell to the rest of the bloc.

France, Italy, Spain and Belgium have banned all short selling of financial stocks for 15 days in response to sharp share price falls this week, but they failed to convince other regulators to go along with a European Union-wide prohibition, the Financial Times reported. The bans on the controversial practice where investors aim to profit from price falls will take effect on Friday morning. But other main markets, including the US and the UK, have said they have no plans to follow suit.

With the sense of economic crisis deepening in Europe after the United States debt downgrade, investors have played Who’s Next with the shrinking list of nations that still hold the top rating of AAA. And their sights have landed on France, the International Herald Tribune reported. The head of the French central bank, Christian Noyer, leaves the Élysée Palace in Paris after a meeting with the heads of major French banks and President Nicolas Sarkozy.

France and Britain are most vulnerable within Europe to a rating review following the U.S. downgrade, with anaemic growth and hefty borrowing placing them among the shakiest of the world's triple-A rated lenders, Reuters reported in an analysis. Both countries have stable rating outlooks, making a sudden downgrade unlikely and markets have been so impressed by Britain's debt-cutting strategy that they have pushed its bond yields to record lows. But a surge in the cost of insuring French debt against default on Monday highlighted alarm sparked by Friday's U.S.

While the financial world was watching Capitol Hill last week, offering up febrile prayers for a ceiling-smashing bill, the International Monetary Fund quietly wondered whether France could hang on to its platinum credit card, The Wall Street Journal Agenda blog reported. Last Wednesday it warned that the country would miss its 3% budget deficit target for 2013 unless it took further steps to cut spending, which were also needed to safeguard—guess what—its credit rating.

It is too early to say what will finally emerge as a deal between European financial groups and governments. But there is a growing consensus that the proposal circulated by the French banking sector on Monday was a credible blueprint, the Financial Times reported. “The French proposals have catalysed the debate,” said Charles Dallara, managing director of the Institute of International Finance, which represents most global banks and helped organise the Rome talks.

Europe's sovereign-debt crisis washed closer to U.S. shores Wednesday after Moody's Investors Service warned it may downgrade three French banks that rely heavily on U.S. money funds for short-term financing, The Wall Street Journal reported. Moody's cited the banks' exposure to Greek debt, and added that it may do the same to other euro-zone banks. The three banks—BNP Paribas SA, Crédit Agricole SA and Société Générale SA—have all said recently that their exposure to Greece remains manageable.

The French government has opened the door to a compromise in the stand-off over Ireland’s corporate tax rate, saying it will take into account Ireland’s “singular situation” in deciding its stance, the Irish Times reported. Amid signs that Paris and Berlin are waiting for a gesture from Ireland, government spokesman François Baroin said no decision had been taken on whether to maintain French opposition to Ireland’s request for a reduction in the interest rate on its bailout loans. “The discussions are continuing.

France will refuse a cut in the cost of Ireland’s European bail-out loans at next week’s meeting of eurozone finance ministers as long as Dublin maintains its ultra-low corporate tax rate, the Financial Times reported. Paris appears to be setting itself against a growing European view that Ireland should be given some extra room for manoeuvre as European leaders weigh the need for a new aid package for Greece, which could also involve a second rate cut.

Government officials from France and Germany went out of their way Monday to stress the need for a unified euro zone even as intensifying worries over Greek debt piled pressure on the currency bloc, The Wall Street Journal reported. In a Europe Day speech, French Prime Minister Francois Fillon on Monday said it's paramount that euro-zone states continue to show solidarity towards one another—signaling France could agree to go further to help Greece meet its funding needs for next year.