MercoPress. South Atlantic News Agency

Three credit rating agencies confirm France as triple-A with stable outlook

President Sarkozy ordered further budget cuts

Moody’s, Standard & Poor's (S&P) and Fitch confirmed Wednesday that France still rates as a triple-A country with a stable outlook. The comments came in response to market rumours of a French sovereign credit rating downgrade, which hit French bank stocks.

Fitch Solutions said that a rise in credit default swap prices on France and Germany may be a sign that the markets are increasingly concerned over the Euro zone's ability to prop up weaker countries in the EU.

President Nicolas Sarkozy on Wednesday ordered his Finance and Budget ministers to find new ways to prune the public deficit, as markets fretted over France's strained finances and banks following a US debt downgrade.

Sarkozy had earlier summoned his top ministers and central bank chief to emergency talks, interrupting the summer recess. He urged all political parties to support his proposal for a constitutional rule to limit future deficits which is set to be defeated in one blow if put to a special two-chamber parliamentary vote.

Budget Minister Valerie Pecresse said after the talks she would target tax loopholes in the 2012 budget. “We will not deviate one inch from our deficit-cutting targets,” she told BFM television.

France – the most indebted of the Euro zone's six AAA-rated states – has vowed to cut its deficit to 4.6% of GDP next year and 3% in 2013, down from 7.1% in 2010 and an expected 5.7% this year.

But public debt is way above the euro zone's recommended 60% of GDP ceiling at around 85% this year, and the market turmoil deals a blow to hopes investment will pick up after a bleak second-quarter.

Sarkozy asked Pecresse and Finance Minister Francois Baroin to outline suggestions to speed up deficit cuts at an Aug. 17 meeting with himself and Prime Minister Francois Fillon. A further meeting on Aug. 24 will formally agree on the steps.

“Whatever the impact of global uncertainty, of the announcement of the US downgrade by S&P, the nervousness of markets, regardless of any of these external parameters we will take the necessary measures to reach our targets,” Baroin told reporters after the meeting.

Prominent French economist Jacques Attali noted S&P report picked out France as the only Triple-A country facing a similar debt ratio in 2015. “We are being explicitly picked out. We must therefore do everything to reduce our debt,” he told Le Monde.

France has not produced a balanced budget since 1974 but, like others, is struggling with low growth – figures on Friday are expected to the economy expanded just 0.2% in the second quarter.