France downgraded by leading credit ratings agency

The French government is defending its economic policies of debt reduction and reform after the country lost its top credit rating on Friday with Standard and Poor’s. The agency downgraded France from AAA to AA+.

French Prime Minister Francis Fillon said that the country had come into the firing line because of its exposure to the ongoing eurozone crisis. Standard and Poor’s last week warned that budget discipline and austerity measures in Europe would not be enough to tackle the debt crisis, and could even end up being self-defeating.

Mr Fillon said that although the decision should not be underestimated at the current time, it should also not be over dramatised. He added that the decision had been expected.

The Prime Minister went on to say that the government would maintain its economic policies, and still aimed to reduce spending so that France’s annual budget would return to surplus by 2016.

France was joined by nine other countries who had their credit ratings downgraded by S&P’s; Portugal, Spain, Italy and Cyprus all dropped by two notches. Portugal and Cyprus now have junk ratings, while Malta, Slovenia, Slovakia and Austria also saw their credit ratings downgraded.

Angela Merkel, the German Chancellor, said that Europe still had a hard task ahead of it if it wishes to restore the confidence of investors; Germany managed to hold onto its top AAA rating.

The system ranges from AAA down to D, which is a point at which a country, or a company, is considered to have defaulted. Anywhere above BBB- is still considered to be ‘investment grade’. France has managed to retain an AAA grade with both Moody’s and Fitch, the other major ratings agencies.