Tuesday

24th Oct 2017

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.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

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.

Macron puts trade policy on summit table

France's president wants a "political discussion" on EU trade policies at Thursday's summit, amid domestic concerns over Canada and South America deals. But his colleagues are likely to avoid a lengthy debate.

News in Brief

  1. Don't let City of London 'drift away', Luxembourg warns
  2. Far-right enters German parliament officially
  3. Orban declares migrant-free zone in Eastern Europe
  4. Madrid set to use force to stop Catalonia independence
  5. May: EU member states will not lose out with Brexit
  6. Slovakia pledges to be 'pro-European' oasis in region
  7. Report: Catalan leader to address Spanish senate
  8. Fiat-Chrysler 'obstructed justice' reports Le Monde

Stakeholders' Highlights

  1. Martens CentreI Say Europe, You Say...? Interview With EU Commission VP Jyrki Katainen
  2. Mission of China to the EUPresident Xi Jinping Proposes Stronger Global Security Governance at Interpol Assembly
  3. European Friends of ArmeniaEU Engagement Could Contribute to Lasting Peace in Nagorno-Karabakh
  4. UNICEFViolence in Myanmar Driving 12,000 Rohingya Refugee Children Into Bangladesh Every Week
  5. European Jewish CongressBulgaria Applauded for Adopting the Working Definition of Antisemitism
  6. EU2017EENorth Korea Leaves Europe No Choice, Says Estonian Foreign Minister Sven Mikser
  7. Mission of China to the EUZhang Ming Appointed New Ambassador of the Mission of China to the EU
  8. International Partnership for Human RightsEU Should Seek Concrete Commitments From Azerbaijan at Human Rights Dialogue
  9. European Jewish CongressEJC Calls for New Austrian Government to Exclude Extremist Freedom Party
  10. CES - Silicones EuropeIn Healthcare, Silicones Are the Frontrunner. And That's a Good Thing!
  11. EU2017EEEuropean Space Week 2017 in Tallinn from November 3-9. Register Now!
  12. European Entrepreneurs CEA-PMEMobiliseSME Exchange Programme Open Doors for 400 Companies Across Europe

Latest News

  1. Barnier plays down hope of 'special' Brexit deal
  2. MEPs demand external probe into parliament sex abuse
  3. EU states overcome divisions on posted workers
  4. How Romania became EU workers' rights 'guinea pig'
  5. Left unchecked, Poland's attack on rights will harm EU
  6. EU commission denies May 'begged for help' comments
  7. Interpol needs EU help to stop abuse
  8. Glyphosate protesters hold meeting with Commission