French prime minister downplays credit downgrade

Francois Fillion is seeking to reassure the international markets.

Story highlights

  • PM Francois Fillon: "This warning should not be dramatized"
  • Ratings agency Standard & Poor's took away France's top-tier AAA credit rating Friday
  • Eight other euro area countries -- including Italy -- were also downgraded by the agency
  • "France is a safe country, a country which investors can trust," Fillon says

French Prime Minister Francois Fillon insisted Saturday that France is a safe bet for investors, a day after the country's credit rating was downgraded by a ratings agency amid concerns over debt and low growth.

France was among nine euro area countries to be downgraded by Standard & Poor's Friday, losing its AAA rating in the process. Austria also had its top-tier credit rating lowered by one notch to AA+.

Speaking in Paris, Fillon sought to reassure the international markets.

"France is a safe country, a country which investors can trust and have confidence in. The rating agencies are useful barometers, but they are not the ones who make France's policies," he said.

"France's rating remains one of the highest in the world."

He also cautioned against politicians making too much of the downgrade -- which had been widely anticipated after S&P put 15 members of the euro currency bloc, France among them, on review last month.

"This decision constitutes a warning that must be neither dramatized nor underestimated," Fillon said.

"Those who dramatize the situation should think twice: these are indeed the same people who refused to vote on reforms to strengthen our competitiveness and to reduce deficits, whether that be downsizing the public sector or the pension reform."

The downgrade may be seen as bad news for the government ahead of the country's presidential election in April.

President Nicolas Sarkozy of the UMP party is bidding for re-election, with Socialist Francois Hollande considered his chief rival.

"Everyone needs to remain calm and remember their responsibilities," Fillon said. "The government remembers its responsibility and is pursuing the strategy agreed on with the president."

Germany, Finland, the Netherlands and Luxembourg all maintained their AAA ratings.

But S&P cut the ratings of France, Austria, Malta, Slovakia and Slovenia by one notch. Italy, Spain, Portugal and Cyprus were cut by two notches.

S&P warned that most governments in the single currency euro area are at risk of further downgrades given the risk of a "more adverse economic and financial environment."

The agency said a deeper-than-expected recession in the eurozone would put further stress on government finances. In addition, governments remain vulnerable to further turmoil in the bond market, which could drive up their borrowing costs.

Nonetheless, S&P said it welcomed recent moves by the European Central Bank to help prevent a credit crisis in the banking system.

German Chancellor Angela Merkel said Saturday that Europe still has a long road ahead to restore investor confidence.

But, she said in a statement, the right steps have been taken, and measures to cut debt and remove obstacles to growth will soon lead to greater stability for euro zone nations.

U.S. stocks finished in the red Friday as investors braced for the impending downgrades.

The news came at the end of a week in which solid demand at debt auctions in Italy and Spain had calmed some nerves, however, and eased borrowing costs for those two governments.