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Fitch downgrades France’s credit rating

French Finance Minister Michel Sapin (R) with President François Hollande (C) and Economy Minister Emmanuel Macron (L)
French Finance Minister Michel Sapin (R) with President François Hollande (C) and Economy Minister Emmanuel Macron (L) Reuters/Philipp

Ratings agency Fitch cut France's credit grade to AA, down a notch from AA+, on Friday, saying the government’s efforts to cut the country’s debt have not been good enough.

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The weak outlook for the French economy impairs the prospects for fiscal consolidation and stabilizing the public debt ratio," Fitch said.

Under continued pressure from the European Commission to cut the budget deficit, France recently reduced its forecast for 2015 to 4.1 per cent of GDP from 4.3 per cent.

But Fitch remains unimpressed.

Dossier: Eurozone in crisis

"On its own, this will not be sufficient to significantly change Fitch's projections of France's government debt dynamics," the agency said. "The 2015 budget involves a significant slippage against prior budget deficit targets."

It also predicts that the French economy will experience lower growth than the eurozone average “for the first time for four years”.

In response to the downgrade French Finance Minister Michel Sapin insisted the government was narrowing its budget gap while supporting growth.

"In a difficult economic environment in Europe, the government is sticking to its path ... pursuing the reforms necessary to strengthen growth and make businesses more competitive," he said in a statement. "The policy has begun to produce results with companies benefiting from the initial effects of tax reductions, which will continue in the coming years."

Standard & Poor’s, which had already reduced France’s rating to AA, lowered its expectations of the reduction of France’s debt.

Moody’s still rates France at the second-highest level possible.

Despite the downgrades, France continues to borrow at historically low rates.
 

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