S&P cuts France credit rating due to slow reform pace

Standard & Poor’s has cut France’s sovereign credit rating by one notch to AA from AA+, judging President Francois Hollande’s economic reforms inadequate to spur growth.

While all three major rating agencies (S&P, Moody’s and Fitch) had already stripped France of its top-grade triple-A status, S&P is the first to downgrade it for a second time.

“We believe the French government’s reforms to taxation, as well as to product, services, and labor markets, will not substantially raise France’s medium-term growth prospects,” S&P said in a statement.

“Ongoing high unemployment is weakening support for further significant fiscal and structural policy measures,” it added.

S&P adjusted French debt to stable from negative, citing Hollande’s commitment to containing net general debt, which it expects to peak at 86% of output in 2015, Reuters said.

However, Finance Minister Pierre Moscovici insisted his country’s debt remained among the safest and most liquid in the world and challenged what he said were “inaccurate criticisms” of the French economy.

Ratings agency Fitch last week upgraded the outlook on Spain’s credit rating, pointing to a convergence between France – typically considered a core euro zone member – and Spain, usually described as a peripheral state, Reuters reported.

S&P also said the probability of a further rating action on France over the next two years was less than one in three.

 

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