Credit rating agency Fitch said on Wednesday it will review its triple-A rating on France next year, as Paris hailed a muted market reaction to a Moody’s downgrade this week as a sign of investor confidence in its policies.
French-owned Fitch is the only agency to retain a triple-A rating on the euro zone’s second largest economy, though it has a negative outlook.
Moody’s decision to cut France by one notch to Aa1 on Monday followed a similar downgrade by Standard & Poor’s in January.
“France will be re-examined, as Fitch has said, in the course of 2013,” Fitch Chairman Marc Ladreit de Lacharriere told France Inter radio.
French bonds largely shrugged off the Moody’s downgrade, which had been widely expected after the agency put France on a negative outlook in February.
The yield spread of French 10-year bonds to benchmark German Bunds stood around 75 basis points on Wednesday, only slightly changed from 72 before the downgrade.
Finance Minister Pierre Moscovici said the market response to the news was a vote of support for government efforts to trim France’s deficit, boost competitiveness and make labour markets more flexible.
“There is confidence in the French economy,” Mr. Moscovici said. “Our loans are still being served at an extremely low interest rate. France has credibility.”
Moody’s had cited France’s sustained loss of competitiveness and a failure to tackle structural problems amongst the reasons for its decision. It also voiced concerns over France’s fiscal situation and the risk of knock-on effects from the euro zone crisis.
French officials have been quick to point out that preliminary third-quarter GDP figures showed France’s €2-trillion economy growing 0.2 per cent quarter-on-quarter, the same rate as euro zone powerhouse Germany’s.
Mr. Moscovici said France’s Socialist government regarded the downgrade as an encouragement to press ahead with reforms. However, he dismissed Moody’s warning that France could miss its budgetary growth targets, jeopardising its plan to cut the public deficit of 3 per cent of GDP next year.
“If we are able to provide remedies to the problems of the euro zone ... if we are able to implement our competitiveness policy ... and companies respond to it, then we will have 0.8 per cent growth next year and 2 per cent in 2014,” Moscovici said.
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