Euro chief Juncker sees 'no reason' for France downgrade

22nd November 2011, Comments 0 comments

Eurozone chief Jean-Claude Juncker said Tuesday that there was "no reason" either now or in the foreseeable future for ratings agencies to downgrade France, the eurozone's second largest economy.

"I don't believe that the rating of France should be downgraded," Juncker said after Moody's warned of the threats to the country's top 'AAA' rating, after Italy and Spain saw their borrowing costs rise very sharply in recent weeks.

"I can see no short- nor medium-term reasons for doing this," Juncker said, after talks with new Greek Prime Minister Lucas Papademos focused on re-activating frozen bailout funds for Athens, the epicentre of the eurozone debt crisis.

France, which now pays nearly twice as much as Germany for long-term funding, is fighting desperately to retain its triple-A credit status and has slashed spending and tightened up on tax revenues in an effort to stabilise its strained public finances.

Moody's on Monday cited an increase in French government borrowing costs, slowing growth and the knock-on effects of the wider eurozone debt crisis as reasons why the risk premium France pays compared to Germany could rise again.

One of the world's top three credit ratings groups, Moody's said "the domestic and external economic growth outlook presents significant downside risks," citing France's costly social spending as the main threat.

President Nicolas Sarkozy, lagging in the opinion polls going into May 2012 presidential elections, says he will do everything possible to ensure France keeps its top rating even as many in the markets say a downgrade is already a done deal.

© 2011 AFP

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