Fearful UK banks have pulled tens of billions of pounds out of the struggling French economy in the face of a looming credit rating downgrade.
France is clinging to its gilt-edged status by the slenderest of threads as financial market worries grow over the exposure of its fragile banking system to Europe's sovereign rows. Many economists predict a downgrade of its prized AAA credit rating within days.
Bank of England statistics released yesterday showed Britain's banks slashing their exposure to French public debt by $29.3bn (£18.9bn) between July and September.
The exodus from France accounted for almost half the $62.4bn British banks shaved from their financial exposure to the rest of the world in the third quarter, when Europe's sovereign debt crisis entered a dangerous new phase. UK banks also pulled a combined $20bn out of Spain and Italy and instead sought the safety of ultra-safe German bunds, piling some $40.3bn into Germany and $21.1bn into the Netherlands.
US Treasuries were also in demand despite ratings agency Standard & Poor's stripping the US of its triple-A rating for the first time in August.