S&P lowers France credit rating, cites slow reform pace

Fri Nov 8, 2013 3:19am EST
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By Nicholas Vinocur

PARIS (Reuters) - Standard & Poor's cut France's sovereign credit rating on Friday by one notch to AA from AA+, giving a thumbs-down to President Francois Hollande's efforts to put the euro zone's second largest economy back on track.

All three major rating agencies had already stripped France of its top-grade triple-A status. S&P is the first to downgrade it for a second time, warning that the economic reforms of the past year were not sufficient to lift growth.

"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.

The ratings agency adjusted its outlook for French debt to stable from negative, citing Hollande's commitment to containing net general debt, which it expects to peak at 86 percent of output in 2015.

French OAT futures were 18 ticks lower at 134.41 after the move. 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. <ID:L5N0IT0LK>

"They are underestimating France's ability to reform, to pull itself up," he told France Info radio.

"During the last 18 months the government has implemented major reforms aimed at improving the French economic situation, restoring its public finances and its competitiveness."   Continued...

A view shows the Standard & Poor's building in New York's financial district February 5, 2013. REUTERS/Brendan McDermid