France denies rumours of credit rating downgrade

10th August 2011, Comments 0 comments

France on Wednesday denied rumours it was heading for a downgrade of its AAA credit rating after the United States was stripped of the prized status last week.

"These rumours are totally unfounded and the three (rating) agencies -- Standard & Poor's, Fitch and Moody's -- have confirmed that there is no risk of a downgrade," a finance ministry official said,

The statement came just hours after President Nicolas Sarkozy promised new measures to slash France's public deficit amid fears the country could be next after the United States to suffer a top credit-rating downgrade.

Standard & Poor's, the agency that downgraded US sovereign debt last week, said this week it had no plans to take similar action against France because Paris had a clear policy to cut its deficit.

But French debt has faced pressure on the markets as the cost of credit default swaps -- insurance policies against a default -- hit record highs this week, suggesting investors were beginning to look at France more closely.

After the United States, "the other AAA-rated G7 sovereigns are all at risk of a downgrade, with the markets focusing particularly on France," said London-based Citi economist Willem Buiter.

Jennifer McKeown, senior economist at Capital, said: "Growing concerns about Frances fiscal position have underlined the breadth of the eurozones debt crisis."

© 2011 AFP

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