Tuesday

31st May 2016

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.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

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.

Finance ministers baulk at tax-avoidance rules

Member states will discuss again in June a proposed directive to outlaw practices used by large companies to avoid paying taxes. Meanwhile, the European Parliament makes progress on its probe of Panama Papers.

News in Brief

  1. Hungary reinforces fence on Serbian border
  2. Juncker to seek renewed backing for TTIP talks
  3. EP president rules out return to German politics
  4. Austrian far-right wants to probe election fraud accusations
  5. Irish PM warns Brexit could bring back border controls
  6. Truckmakers risk record cartel fine
  7. London mayor teams up with British PM on Brexit
  8. Syrian refugees sue Denmark over immigration law

Stakeholders' Highlights

  1. ACCAEducation and Training 2020 - Giving Young People the Workplace Skills They Need
  2. EPSUTrade Unions Back New Undeclared Work Platform
  3. European Healthy Lifestyle AllianceCould targeting children’s fitness boost academic performance?
  4. World VisionDeclares the World Humanitarian Summit a Positive Step in a Longer Journey to Ending Need
  5. EJCPresident Dr. Moshe Kantor on Brexit and the Jewish Question
  6. Swedish EnterprisesNew rules for posted workers - Better Protection or the End of Posting ?
  7. World VisionWhy The EU Needs to Put Children at the Centre of Emergencies - In Their Words
  8. ACCASustainability Reporting in Danger of Losing Its Momentum Says ACCA and CDSB
  9. Dialogue PlatformDiversity as Heritage of Humanity! Join the “Colors of the World“ Show at the EP
  10. Centre Maurits CoppietersNew Responses to the Basque Peace Process? MEP Juaristi on Stateless Challenges Conference
  11. European Healthy Lifestyle AllianceImproving Cardiovascular Health Begins by Closing the Gap in Sex Disparities
  12. IPHRBrussels Talks to Take Stock of Human Rights in Turkmenistan