France is insisting that its triple-A credit rating is safe despite a warning from ratings agency Moody’s.
Moody’s said it could place France on negative outlook for a downgrade in the next three months if the costs for helping to bail out banks and other euro zone members overstretch its budget.
The finance ministry did acknowledge growth would probably miss its target and more belt tightening may be needed.
France is one of a shrinking number of euro zone countries with the coveted triple-A status. Out of the 17 that use the single currency just six — Austria, Finland, France, Germany, Luxembourg and the Netherlands — are considered creditworthy enough these days.
Finance Minister Francois Baroin said: “Everything is being done to maintain the rating, which is one of the best in the world, which makes France a safe investment. France has the means to address this, we are one of the leading countries in terms of public spending, so if necessary we will take steps to reduce expenditure and to meet these objectives.”
Prime Minister Francois Fillon has said next year’s budget will work even if French economic growth falls to 1.5 percent.
The budget, which aims to reduce the deficit to three percent of GDP by 2013, is currently being debated in parliament.
Recapitalising France’s banks is one issue causing the rating agencies to ponder a downgrade, but analysts said it was weak growth, not the banking sector, which posed the main threat to France’s ratings.
A negative outlook would be a sign that Moody’s could downgrade its rating on France in the next couple of years. Moody’s placed the United States’ triple-A rating on negative outlook in August.