Fitch cuts France's credit rating on budget, economy woes
Fitch cut France's credit rating Friday to AA-plus on an uncertain economic outlook amid the ongoing euro zone crisis and the need for structural reform. The move cost the monetary union's No. 2 economy its last major triple-A rating.
The outlook is stable.
In explaining the cut, the rating agency cited a number of causes for concern: weaker economic output, a jump in the unemployment rate, budget deficits and subdued external demand, among others.
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Risks to fiscal projections "lie mainly to the downside," the rating agency said in a statement.
The euro zone's three-and-a-half-year sovereign debt crisis has strained the monetary union, with even major economies such as France and Germany feeling the pain.
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French gross domestic product, flat in 2012, is expected to drop 0.3 percent this year before expanding 0.6 percent in 2014, according to the median forecast in a Reuters poll this week.
"It's [the French downgrade] a reminder, if one were needed, of the breadth and depth of the euro zone crisis," said Nicholas Spiro, director of Spiro Sovereign Strategy.
"Although France has been trading like a core euro zone credit pretty much throughout the crisis, its weak economic fundamentals have long belied its low borrowing costs. In some ways, France has been the 'lucky peripheral,'" he said.
Ratings agency Standard & Poor's on Tuesday week lowered Italy's credit rating.
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"If Italy's debt market was able to shrug off this week's sovereign downgrade, then France's is even less likely to be affected," said Spiro. "However, if there's one country in which a downgrade ought to be a wake-up call for politicians to step up the pace of fiscal and structural reforms, it's France."