France escapes rating downgrade

France hung onto its AAA credit rating from Fitch Ratings on Friday, but the only agency to rate French debt at the highest level left the country on "negative outlook", saying further structural reforms were needed to avoid a downgrade.

The other two big ratings agencies - Standard Poor's and Moody's - stripped France of its AAA rating this year and placed the country under negative outlook. SP downgraded France to AA+, Moody's to Aa1.

Fitch, which is owned by a Frenchman, cited France's "wealthy and diversified economy, stable political, civil and social institutions and its exceptional financing flexibility" as the rationale for upholding its AAA rating.

France, no more than its other top-rated euro zone peers, was "not especially exposed to an external financing shock", Fitch said.

But Europe's second-largest economy still stood a more than 50% chance of being downgraded in 2013.

While praising the Socialist government's introduction of tax credits for companies, Fitch warned that more reforms were needed to boost competitiveness, which was critical to restoring growth and creating jobs.

As things stood France was likely to miss its target of 0.8% growth next year, said Fitch which predicted growth of 0.3%. The International Monetary Fund has predicted growth of 0.4%.

Finance Minister Pierre Moscovici welcomed the qualified thumbs-up as "an encouragement" which "clearly says that France is moving in the right direction, that we are undertaking structural reforms".

Fitch forecasts growth of 0.3% in 2013 and 1.1% in 2014.

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Article source: http://www.thethailandlinks.com/2012/12/14/france-escapes-rating-downgrade/