France's credit rating was downgraded Thursday by Egan-Jones Ratings, which said the new government's proposed policies could weaken the country's finances and that French banks could need help.
France’s credit rating was downgraded Thursday by Egan-Jones Ratings, which said the new government’s proposed policies could weaken the country’s finances and that French banks could need help.
The agency lowered France to “BBB+” from “A-” and assigned a negative outlook, which could foreshadow future downgrades.
Egan-Jones is smaller than the three main firms that issue ratings on companies and countries – Standard & Poor’s, Moody’s and Fitch – all of which have ratings on France that are several notches higher.
S&P has a “AA+” rating while Moody’s and Fitch have “AAA” ratings. All three have “negative” outlooks.
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Egan-Jones said France has mostly avoided the rise in borrowing costs over the past 18 months, but the ratings firm expects that to change as the European debt crisis continues.
Deterioration of France’s credit measurements combined with needed support for its banks “are likely to pressure the country,” the ratings agency said.
Egan-Jones said that new French President Francois Hollande “will be under pressure to keep campaign promises which will ultimately hurt credit quality.”
The official unemployment rate in France climbed to 10 percent in the first quarter, the highest level since 1999. High unemployment and weak economic growth helped the socialist Hollande defeat conservative incumbent Nicolas Sarkozy in last month’s presidential election.