French AAA rating may be downgraded ‘within days’
S&P declined to comment on the report, based on anonymous sources. If true, it would signal that the risk of a downgrade has risen after months of concern about the impact on French public finances of sluggish growth and the costs of the eurozone debt crisis.
Economic and financial daily La Tribune said S&P — which on Friday cut Belgium’s credit rating to AA from AA+ — had planned to make an announcement on France the same day but postponed it for unknown reasons.
“It could happen within a week, perhaps 10 days,” La Tribune quoted a diplomatic source as saying of a change to the outlook.
The euro briefly dipped on the report, which coincided with news that another rating agency, Moody’s, could downgrade the subordinated debt of a swathe of eurozone banks, but edged up against the dollar by mid-morning.
French Finance Minister Francois Baroin said the focus should not be solely on France and that while the eurozone debt crisis was serious, Paris was “clear- sighted” on it.
He also ruled out a third round of budget cuts, as called for by the Organisation for Economic Co-operation and Development, which said a likely recession would drag French growth far below government targets next year.
“Everyone is concerned, not just France. It’s all the eurozone countries,” Baroin told France Info radio.
“France is not an island or economically cut off from the world. It depends on different parts of the eurozone for a large part of its economic activity and that’s why we are, to a large extent, clear-sighted on the crisis.”
He said the government was sticking to its 2012 growth forecast of 1%, and said that allowed for elbow room in the budget.
A French downgrade could also hamper the ability of the eurozone’s EFSF bailout fund to itself borrow from markets.
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