Standard & Poor’s Cuts France’s Credit Rating to AA - by David Joly

Standard & Poor’s on Friday cut its credit rating on France by one notch, saying the government’s current policy initiatives did not appear capable of addressing impediments to economic 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, and that ongoing high unemployment is weakening support for further significant fiscal and structural policy measures,” S.&P. said in explaining its ratings decision. 

The agency downgraded the country to AA from AA+ and said the outlook for the rating was “stable,” reflecting its expectation that the government of President François Hollande would hold debt in check. The agency estimated that France’s debt would peak in 2015 at 86 percent of gross domestic product. 

France’s economy expanded by 0.5 percent in the second quarter of 2013 from the first three months of the year, for an annualized rate of about 2 percent. But unemployment, at 11.1 percent, weighs heavily on growth and on efforts to reduce deficit spending that are mandated under European Union rules. 

On Tuesday, Olli Rehn, the European Union’s head of economic policy, contradicted French government forecasts that show unemployment peaking this year, predicting instead that joblessness would increase until 2015.

Read more: Standard & Poor’s Cuts France’s Credit Rating to AA - NYTimes.com