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Downgraded France stays defiant
Source: Agencies |
November 21, 2012, Wednesday
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FRANCE'S government has shrugged off the latest downgrade of its credit rating, saying yesterday that it just needs time for reforms to the sluggish economy to take root.
In a setback for President Francois Hollande's Socialist government, Moody's Investors Service stripped Europe's No. 2 economy of its prized AAA credit rating late on Monday on concerns that its rigid labor market and exposure to Europe's financial crisis were threatening its prospects for economic growth.
This is the second ratings cut to have hit France this year: Standard & Poor's agency lowered its score in January. The third leading agency, Fitch, still ranks France at AAA-rating but has had it on review for a downgrade since late last year.
But Finance Minister Pierre Moscovici insisted that France's credibility remains strong and that the government's plan to reduce unemployment and restore growth would bear fruit.
France has come under scrutiny as its 2 trillion euro (US$2.5 trillion) economy has stagnated, with many leading French companies laying off workers.
Hollande's government has laid out a series of deficit-reduction targets, vowing to bring it in line with European rules next year. It has also unveiled a plan to improve the competitiveness of its economy, by giving companies 20 billion euros in tax rebates, reducing red tape for businesses, and providing small companies with extra support to compete abroad.
However, many economists say that the greatest threat to France's economy is its stringent labor rules, which make firing difficult and expensive and thus deter hiring. The country has been losing global business for years to more dynamic economies like China's, while fighting unemployment of 10.8 percent and concerns about the future of the eurozone.
Moscovici pleaded for time yesterday, saying the government was convinced it was on the right path but that its reforms just need to take effect. "It takes time to reverse the flow of things. It takes courageous decisions, and that's what we're promising to do," he said.
In a setback for President Francois Hollande's Socialist government, Moody's Investors Service stripped Europe's No. 2 economy of its prized AAA credit rating late on Monday on concerns that its rigid labor market and exposure to Europe's financial crisis were threatening its prospects for economic growth.
This is the second ratings cut to have hit France this year: Standard & Poor's agency lowered its score in January. The third leading agency, Fitch, still ranks France at AAA-rating but has had it on review for a downgrade since late last year.
But Finance Minister Pierre Moscovici insisted that France's credibility remains strong and that the government's plan to reduce unemployment and restore growth would bear fruit.
France has come under scrutiny as its 2 trillion euro (US$2.5 trillion) economy has stagnated, with many leading French companies laying off workers.
Hollande's government has laid out a series of deficit-reduction targets, vowing to bring it in line with European rules next year. It has also unveiled a plan to improve the competitiveness of its economy, by giving companies 20 billion euros in tax rebates, reducing red tape for businesses, and providing small companies with extra support to compete abroad.
However, many economists say that the greatest threat to France's economy is its stringent labor rules, which make firing difficult and expensive and thus deter hiring. The country has been losing global business for years to more dynamic economies like China's, while fighting unemployment of 10.8 percent and concerns about the future of the eurozone.
Moscovici pleaded for time yesterday, saying the government was convinced it was on the right path but that its reforms just need to take effect. "It takes time to reverse the flow of things. It takes courageous decisions, and that's what we're promising to do," he said.
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