French rating cut hits borrowing

RATINGS agency Standard and Poor's (S&P) has cut France's credit rating to AA from AA+, almost two years after the country lost its top-rated AAA status.

The agency has said the outlook for France was now stable, and said it would explain its decision at a press conference this afternoon.

Finance Minister Pierre Moscovici, said S&P had made "critical and inexact judgments" when analysing the French economy.

He reaffirmed the government’s “complete determination to follow through on pledges to reduce public debt, reestablish competitiveness and support growth and employment”.

S&P said in its statement: "We believe the French government's reforms to taxation, as well as to product, services and labour markets, will not substantially raise France's medium-term growth prospects and that ongoing high unemployment is weakening support for further significant fiscal and structural policy measures."

Ratings agencies analyse the economies of countries to assess their ability to pay back debt.

The decision to cut France’s rating means the government will find it more expensive to borrow money, putting an even greater squeeze on its budget plans.

This morning the cost to France of repaying money on 10-year loans had risen 0.2%.

Prime Minister Jean-Marc Ayrault told France Bleu Provence that the agency had not taken into account all the government’s reforms, notably those regarding retirement.

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