France loses AAA rating as euro governments downgraded
France has lost its top AAA credit rating from Standard & Poor’s and many other eurozone governments have also been downgraded by the ratings agency.
Rumours of S&P’s move prompted stock markets to fall earlier in the day.
London’s FTSE 100 ended the day down 0.5% and Frankfurt’s Dax 0.6%, while the Dow Jones in New York fell 0.7%, although it was widely expected that the ratings cuts were coming.
Italy and Spain were also downgraded, but Germany kept its AAA rating.
Austria, like France has lost its top AAA rating, and been downgraded to AA+. Its economy exports a lot to recession-struck Italy, while its banks are facing losses on subsidiaries they own in financially troubled Hungary.
Most other governments are on lower ratings already. S&P’s rating of Italy - currently at the epicentre of the crisis - has been cut two notches from A to BBB+.
French Finance Minister Francois Baroin confirmed the news about his own country ahead of S&P’s announcement on Friday night.
“It’s not good news, but it’s not a catastrophe,” Mr Baroin said following emergency talks called by President Nicolas Sarkozy with the prime minister and other key ministers.
He said the French government was not planning any additional spending cuts or tax rises as a result of the downgrade: “It’s not ratings agencies that decide French policy.”
France is being downgraded just one notch by S&P, to AA+.
The country still has a top AAA rating from the other two main ratings agencies, Moody’s and Fitch.