France will respond to its credit rating downgrade by pushing through budget cuts, PM François Fillon (pictured) said on Saturday. Earlier, Socialist presidential candidate François Hollande blamed the downgrade on President Sarkozy's policies.
AP - France’s prime minister said on Saturday his country will push ahead with cost-cutting measures after its top-tier debt rating was downgraded, a blow with repercussions across financially beleaguered Europe.
Other European countries from Austria to Cyprus assailed ratings agency Standard & Poor’s after a raft of downgrades Friday night. The move may make it more expensive for struggling countries to borrow money, reduce debts and avoid a new recession.
French Prime Minister Francois Fillon struck a somber, measured tone when responding Saturday to the downgrade, which was particularly wounding to France’s self-image and could hurt bailout efforts for struggling eurozone countries.
France is central to those efforts, and the downgrade, by pushing up its own borrowing costs, could make it harder for France to help others.
Fillon said the downgrade confirmed his conservative government’s plans for more reforms to bring down debts, despite worries that more austerity measures could suffocate growth.
The downgrade, coming three months before France holds presidential elections, was "an alert that should not be dramatized any more than it should be under-estimated," he said. He insisted that France is a reliable investment.
Standard & Poor’s stripped France of its coveted AAA status, knocking it down one notch to AA+. It dropped Italy even lower. Germany retained its top-notch rating, but Portugal’s debt was consigned to junk.
Cyprus’ finance minister called Standard & Poor’s two-notch downgrade of his eurozone country to junk status “arbitrary and unfounded.”
Kikis Kazamias said on Saturday that the agency ignored the island’s deficit-cutting measures as well as the discovery of significant offshore natural gas deposits. He said the action illustrates once more how credit ratings agencies exacerbate Europe’s debt crisis.
Austria’s chancellor criticized S&P’s decision to strip his country of the top AAA rating, and noted that his coalition government is working on an austerity package.
Werner Faymann wrote on his Facebook page that “Austria’s economic data remain very good.” He added that the decision showed "that Austria must become more independent from the financial markets.”
The man who tops polls ahead of France’s presidential elections, Socialist Francois Hollande, said the downgrade was a punishment for conservative President Nicolas Sarkozy’s policies. He lashed out Saturday at austerity measures saying they were stifling growth and France’s competitivity.
The downgrade brought a downbeat end to a mildly encouraging week for Europe’s heavily indebted nations and served a reminder the 17-country eurozone faces another tough year.
France’s downgrade to AA+ lowers it to the level of U.S. long-term debt, which S&P downgraded last summer. S&P had warned 15 European nations in December that they were at risk for a downgrade.
Stocks fell Friday as downgrade rumors reached the trading floors of Europe and the United States. But the declines were nothing like the wrenching swings of last summer and fall, when the debt crisis threw the markets into turmoil.