The stripping of France's AAA credit status by the ratings agency Standard & Poor's (S&P) has dealt a serious political blow to French President Nicolas Sarkozy, just three-and-a-half months ahead of the next presidential election. Even though such a development has been considered imminent for weeks, Mr. Sarkozy had himself described the triple-A as an asset that France could not afford to lose.
France has now been downgraded to AA+, a spokesperson from S&P confirmed late Friday night. The decision to downgrade France's credit rating was prompted by “the aggravation of political, financial and monetary problems in the eurozone with which France is closely intertwined,” the agency stated. France is Europe's second largest economy and a major influence in European and world politics, considering it is a permanent member of the United Nations Security Council.
The negative growth perspective for France means that the country's credit rating could be brought down another notch over the next quarter. President Sarkozy is hoping to win a second-term during presidential elections in May.
Nine eurozone nations have had their credit ratings downgraded. All the countries of the eurozone now face negative perspectives except Germany and Slovakia. The only economies in the eurozone that continue to enjoy the prized AAA status are Germany and Finland although the latter faces a negative growth perspective. European stocks fell sharply after the announcement and the Euro nosedived against the dollar and the yen.
The downgrade comes at a particularly delicate time for President Sarkozy whose rivals jumped on this opportunity to denounce his failure. “Mr. Sarkozy had said that retaining the AAA rating was a not just an objective it was an ‘obligation'. This downgrade signals the failure of his five years in office. I do not wish to denigrate my own country but for several months now the markets have been warning us.
The government continues in its blind belief that growth is 1 per cent when it is half that. We are no longer in the premier league,” Socialist leader Francois Hollande and Sarkozy's nearest rival for the next presidential crown said on Saturday.
The president's office said it had no comment to make on the S&P decision. Mr. Sarkozy has called a crisis meeting of some of his senior ministers and advisers.
Marine Le Pen, the candidate of the xenophobic extreme right National Front which has sworn to pull France out of Europe and seal the country's borders both against immigration and cheap goods from emerging economies, said this was the first step towards the explosion of the eurozone. The S&P decision only underscored the disastrous nature of Mr. Sarkozy's reign, Ms. Le Pen said.
The National Front has hugely increased its popularity in recent months and polls say Ms. Le Pen could win up to 21.5 per cent of the vote in the first round of the election. She could therefore be a serious threat to both the leading candidates — Mr. Sarkozy from the Right and Mr. Hollande from the Left. The presence of the National Front in the presidential poll's second round run-off can now no longer be excluded. Developments like Friday's credit ratings downgrade give more grist to Ms. Le Pen's mill, especially with massive layoffs, rising debt and record unemployment.
A chorus of opposition voices from across the political spectrum on Saturday denounced Mr. Sarkozy's policies, saying he was the captain of a ship that was rapidly taking in water.
The EU's economic affairs commissioner Olli Rehn said he ‘regretted the decision' which he qualified as ‘aberrant'.