It was almost like Standard and Poor’s stripping France of its AAA credit rating never happened as on Thursday, in its first auction of medium-term government bonds since the downgrade, Paris was able to sell almost eight billion euros worth and offered a lower rate of interest to investors than before.
Another downgraded country, Spain, also had no trouble selling its longer-term debt.
French market analyst Gregory Moore of Montsegur Finance explained the situation there: “I think that the markets had discounted the one-notch downgrading by Standard & Poor’s of France’s credit rating. But at the moment France isn’t being seen as the bad boy and it can borrow at levels that are below what it had to offer as interest two weeks ago.”
Shortly after the bond sale, French President Nicolas Sarkozy attacked Standard & Poor’s saying his policy would not be dictated by rating firms: “It’s not what credit agencies say that counts, the agencies don’t make policy. What matters is that we have too much debt, too big a deficit, too much spending. And the right thing to do is reduce spending, the debt and the deficit.”
Sarkozy again pledged that France would launch a financial transaction tax, going it alone in the belief that other countries would follow.
“France will set the example, we will adopt a tax on financial transactions, and the rest of Europe will follow behind, and I hope the rest of the world too,” Sarkozy said.
The French President sought to dispel fears that his country is on the brink of recession.
“Is there a single one of you who would like to see France in the same position as Greece, Portugal or Spain, or even Italy? What happened in those countries? They did not make the difficult decisions they needed to make at the right time. When you put off a difficult decision, you have to make that decision later, when it is too late,” Sarkozy said.
Blasted by the opposition as the man who lost France’s AAA credit rating and lagging in the polls, Sarkozy, has said that he will use the last three months of his mandate to focus on cutting unemployment and making French companies more competitive.