THE government has sought to downplay the significance of the loss of France’s AAA status at ratings agency Standard & Poor’s.
“Credit ratings agencies are useful indicators, but it’s not they that make the politics of France,” said Prime Minister François Fillon, reacting to the news.
France remains top-rated at the two other main agencies for the time being (Fitch and Moody’s). Standard & Poor’s however has gone so far as to place France’s lower AA+ rating on “negative outlook”, saying there is a chance in three that it will be reduced again this year or next.
Only Germany remained unscathed in the Eurozone, keeping its AAA and remaining on a “stable” outlook. Three other countries kept theirs – Luxembourg, Finland and the Netherlands, but were rated “negative”.
Fillon criticised the “excessive reactions” of the opposition.
Socialist presidential candidate François Hollande has claimed that “it’s a political strategy that has been downgraded, not a country”, saying the Sarkozy governments efforts have lacked “coherency”. Hollande deplored the fact that Germany was spared downgrading, as the rates at which the neighbouring country is able to borrow have already become significantly better than France’s in recent months.
Standard & Poor’s, explaining its action, said the recent efforts of the Eurozone leaders to salvage the currency had not been enough to “structurally resolve the financial difficulties”. Concerning France specifically, it said the country had “a relatively high public debt and an inflexible work market”.
It said that if growth this year and next turns out to be less than predicted by France (1% and 2%), budgetary measures announced so far may not be enough.
According to Fillon however, “the government, without waiting for the observations of S & P has undertaken a strategy to improve our competitivity in the service of growth since the start of the mandate.”
Furthermore the budget measures it has taken so far are “sufficient” at present, he said. However once the growth figures for last year have been fully analysed there could be “adjustments if necessary”.
The government is also counting on new ideas coming out of a “work summit”, to be held this Wednesday, which will be discussing competitivity, growth and jobs.
President Sarkozy also plans to address the nation at the end of the month. He said in a speech at Amboise: “I will tell them about the important decisions that must be taken without losing any time. I will tell them that the crisis can be overcome as long as we have the collective will and the courage to reform our country.”
Photo: Benjamin Lemaire/Creative Commons