Washington: Rating agency S&P took a watch-and-wait attitude to new French economic reforms yesterday, holding an already downgraded notation but with a negative outlook, while giving the benefit of the doubt to the government's determination to enact change.
The S&P decision holding its rating at 'AA+' came four days after Moody's cut its top rating for the country by one notch to 'Aa1' and warned that more could come. The latest S&P statement used a slightly more optimistic tone about the outlook for reforms being pursued and enacted than had Moody's.
S&P, which downgraded France from top notch in January, referring to recent French announcements on the economy, said although the government was "determined to carry out budgetary and structural reforms" France's long-term outlook was "negative."
It said: "After flat growth this year, we believe that the French economy will grow by 0.4 per cent in real terms in 2013." This is about half the target of the government which is hoping for growth of 0.8 per cent. The European Commission is forecasting growth of 0.4 per cent for France in 2013.
S&P expressed concern over "wavering consumption levels, rising unemployment, and decelerating wages."
But is also said in a significant passage, that it believed "that the French government remains committed to budgetary and structural reforms that would build on the measures it has proposed so far and improve the growth potential. Fitch still gives France a top-notch rating.