CORRECTED: France must cut spending or lose top AAA rating: minister

31st May 2010, Comments 0 comments

France has to carry out its planned cuts in spending and reduce its deficit in order to keep its top AAA credit rating, budget minister Francois Baroin told French television.

"The objective of maintaining the AAA rating is an objective that is a stretch and which in part conditions the savings policies that we want to have," he told Canal Plus on Sunday.

"We have to maintain our AAA, reduce our indebtedness to avoid being too dependent on the markets...," he added.

The crucial "AAA" rating is the top ranking attributed by the international financial ratings agencies who evaluate the financial health of states, which allows them to borrow at more favourable rates.

Sarkozy's government has forecast the public deficit will run to 8.2 percent of gross domestic product this year, 6.0 percent in 2011 and 4.6 percent in 2012.

If this trend continues, the French public deficit will not return to the eurozone Stability Pact's theoretical maximum limit of three percent in 2013, and that is conditional on achieving growth of 2.5 percent from 2011.

While many of France's neighbours have announced harsh spending cuts, French President Nicolas Sarkozy, has been cautious, refusing to speak of an austerity programme.

But the government is planning to tighten health spending, reform pension rules and raise the minimum age for retirement in a bid to control mounting debt.

© 2010 AFP

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