Friday

29th Mar 2024

France stripped of another top rating

  • France's economic outlook is getting grimmer (Photo: Moyan Brenn)

Moody's on Monday (19 November) became the second ratings agency to strip France of its top rating, citing continued economic woes and lack of competitiveness, a blow to President Francois Hollande who tried to fix the problem with higher taxes.

The downgrade of the French government's projected capacity to pay back its debt comes after Standard&Poor's in January - still during the presidency of Hollande's predecessor Nicolas Sarkozy - was the first of the three top rating agencies to slash France's triple-A status.

Read and decide

Join EUobserver today

Get the EU news that really matters

Instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

Moody's said the move was due to France's "sustained loss of competitiveness" and "long-standing rigidities of its labour, goods and service markets."

The International Monetary Fund earlier this month also warned France it may fall behind Italy and Spain on labour market reforms and competitiveness, as French exports are shrinking compared to other eurozone countries, especially Germany.

A report commissioned by the French government and drafted by industrialist Louis Gallois issued a similar warning, suggesting "shock therapy" was needed to bring down labour costs and re-balance the economic relationship to Germany.

French finance minister Pierre Moscovici on Monday said the downgrade "does not put into question the fundamentals of the French economy and is a motivation to pursue structural reforms."

Elected on an anti-austerity ticket, Socialist President Francois Hollande has sought to avoid harsh social welfare or wage cuts. In a reforms package passed in earlier this autumn, the main measures were tax hikes for the rich and on capital gains by companies.

An internet movement called "the pigeons" warned that the new taxation is stifling investments in start-ups and small enterprises succeeded in rolling back some of the measures.

Hollande also sent his German-speaking Prime Minister, Jean-Marc Ayrault, to Berlin for talks with Chancellor Angela Merkel. In a joint press conference last Thursday, the two seemed to be singing for the same hymn sheet. They agreed more reforms are needed and that France has to boost its competitiveness. Ayrault said Paris remains fully committed to bring down the budget deficit to 3 percent of GDP by next year.

Merkel, for her part, said she was not going to "give grades" to France on its reforms, even though Berlin is "observing" what is going on there.

She also said that the Franco-German relationship was above the rival political families their two leaders are from. It was "normal" for the French Socialists to support her challenger in next year's general elections, just as she had supported Nicolas Sarkozy who lost to Hollande.

"Once elected, however, we are all working very well together, this is something we have practised for decades," Merkel said, noting that Jacques Chirac and Helmut Kohl had also hailed from different political parties.

'Swiftly dial back' interest rates, ECB told

Italian central banker Piero Cipollone in his first monetary policy speech since joining the ECB's board in November, said that the bank should be ready to "swiftly dial back our restrictive monetary policy stance."

Opinion

EU Modernisation Fund: an open door for fossil gas in Romania

Among the largest sources of financing for energy transition of central and eastern European countries, the €60bn Modernisation Fund remains far from the public eye. And perhaps that's one reason it is often used for financing fossil gas projects.

Latest News

  1. Kenyan traders react angrily to proposed EU clothes ban
  2. Lawyer suing Frontex takes aim at 'antagonistic' judges
  3. Orban's Fidesz faces low-polling jitters ahead of EU election
  4. German bank freezes account of Jewish peace group
  5. EU Modernisation Fund: an open door for fossil gas in Romania
  6. 'Swiftly dial back' interest rates, ECB told
  7. Moscow's terror attack, security and Gaza
  8. Why UK-EU defence and security deal may be difficult

Stakeholders' Highlights

  1. Nordic Council of MinistersJoin the Nordic Food Systems Takeover at COP28
  2. Nordic Council of MinistersHow women and men are affected differently by climate policy
  3. Nordic Council of MinistersArtist Jessie Kleemann at Nordic pavilion during UN climate summit COP28
  4. Nordic Council of MinistersCOP28: Gathering Nordic and global experts to put food and health on the agenda
  5. Friedrich Naumann FoundationPoems of Liberty – Call for Submission “Human Rights in Inhume War”: 250€ honorary fee for selected poems
  6. World BankWorld Bank report: How to create a future where the rewards of technology benefit all levels of society?

Join EUobserver

EU news that matters

Join us