However, Fitch has kept its negative outlook, suggesting France could be downgraded soon. The UK, Germany and Canada are the only major economies to currently have a AAA rating from all three agencies.
A cut to a credit rating means that a country is perceived as more risky to lend to, which means the cost of borrowing from international investors can rise. When its rating was cut by Moody’s last month, French Finance Minister Pierre Moscovici downplayed the importance of the decision.
France had narrowly avoided falling into recession during the third quarter of 2012, registering 0.2% economic growth from the previous quarter. Over the course of the past 12 months, however, the French economy has more or less stagnated.
France‘s Socialist government is enacting reforms that buck the trend of austerity in Europe, such as President Francois Hollande’s decision to reinstate retirement at 60 for some workers. It has also raised the wealth tax on citizens and increased the highest rate of income tax to 75%.
A recent edition of the Economist magazine dubbed France “the time bomb at the heart of Europe”, claiming it had an under-competitive economy and over-dependence on government spending.
On Thursday, Standard & Poor‘s became the last of the three main rating agencies to put the UK’s AAA rating on “negative outlook”. The UK, Germany and Canada are the only major economies to currently have AAA ratings from all three agencies.
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Park Sae-jin
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