France and Spain defiant after dowgrades

The French and Spanish leaders have joined forces in trying to shrug off the dowgrading of their countries’ economies by the rating agency S&P. France lost its cherished triple AAA status on Friday, while Spain and 7 other eurozone countries were also marked down.

President Nicholas Sarkozy said it would have no impact: “It’s not the rating agencies who should define the economic policies of respective countries. The economic policies of a big country are not decided on a whim. I’ve no intention of taking account of what one or other of them say. I must take account of what happens in the real economy – excessive deficit, too much spending, not enough growth.”

Spain will see how the market reacts to its downgrade in a short-term bond auction on Tuesday. The Spanish prime minister, Mariano Rajoy, also played down the impact and repeated calls for a financial transaciton tax.

He said: “I’m in favour of a financial transaction tax, as I’ve said before. I think that what we all want is to discuss it, approve and apply it. Because one of the things we’ve talked about today is that decisions are often taken too late.”

Sarkozy was in Madrid to receive an award for France’s cooperation with Spain in its battle against the violent Basque separatist group ETA.

He now faces a domestic battle to get re-elected in April, and will be hoping the downgrade does not have a lasting effect on the minds of voters.

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