France will retain its top credit rating: minister

1st June 2010, Comments 0 comments

France runs no risk of losing its top quality credit rating, Budget Minister Francois Baroin said on Tuesday two days after saying that the target of holding on to the AAA rating was under strain.

"There is no doubt, there is no risk," he said, insisting that France was committed to policies which would ensure it retained its AAA notation.

France, and its top rating, have been a mainstay of the eurozone in recent months of debt crisis in some members of the 16-nation bloc and the creation of a huge financial safety net.

When credit rating agencies downgrade a country's rating because of a judgement that the risk of holding that country's debt has risen, the cost of borrowing to cover a public deficit usually rises.

Baroin said on French BFM radio: "France's signature (rating) is one of the most advantageous today, it is a safe-haven signature. We saw this at the time of the Greek crisis."

He said: "Everyone has turned to the German and French signature. Why? Because we have a diversified economy, because we have a qualified work force, because we have a level of private debt which is low compared to other countries which are being shaken, because we have a banking system within (risk) ratios which are among the most stable."

Baroin said that the strong credit rating "enables us to finance our projects".

He continued: "And we will keep that. There is no doubt, there is no risk, there is no question about it because we have resolutely entered a new era of controlling public finances for the next three years and thereafter."

On Monday the minister had said that the target of holding on to the AAA rating was under strain and that this laid down conditions in part on the economic policy which France wanted to have.

His remarks caused some questioning of the extent to which France was able to hold on to its top rating.

Baroin explained on Tuesday that the French term he had used in his previous remark could be taken to mean that the government was firm and constant in its determination to maintain the rating.

The French public deficit is expected to reach a record high level of 8.0 percent of gross domestic product this year.

President Nicolas Sarkozy has undertaken to reduce the deficit to 6.0 percent of output in 2011, to 4.6 percent in 2012 and to 3.0 percent in 2013, in line with undertakings by France to EU authorities in Brussels.

© 2010 AFP

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