Standard and Poor's maintains top rating for France

"The ratings reflect our views of the wealth and depth of France's economy as well as its political environment, which we regard as stable and oriented toward prudent economic policies," Standard & Poor's credit analyst Marko Mrsnik said yesterday.

The agency, affirming its AAA rating on long-term debt and its A-1-plus rating on short-term debt, said its outlook on France remained stable.

S&P cited the "openness and resilience of the French economy" as well as the country's highly skilled and productive labour force and its secure financial sector.

But it added that such strengths were partially offset by "France's relatively sizeable tax burden and general government debt and its labour market rigidities."

The agency said its stable outlook on France reflected its assumption that the French government will carry on with its budget-cutting measures that could reduce the public deficit to 3.0 per cent of output -- the prescribed eurozone limit -- in 2013.

France has pledged to reduce the public deficit, which covers the central and regional governments along with social welfare spending, from a record 7.7 per cent this year to 6.0 per cent in 2011 and 4.6 per cent in 2012.

"The stable outlook is based on our view of the French government's substantial achievements with its budgetary consolidation strategy, enabling it to meet its fiscal targets through 2013," Mrsnik said.

The agency said that budget measures implemented so far would likely be "insufficient" to reach a public deficit of 3.0 per cent in 2013.

But it added: "We believe that the government will likely adopt further deficit and debt reduction measures despite what we view as risks of political manoeuvring in the wake of the 2012 presidential and general elections."

S&P noted that President Nicholas Sarkozy and his government earlier this year managed to get pension reform through parliament in the face of huge public protests.

The agency said that while an end to stimulus measures in 2011 will weigh on domestic spending, the French economy next year is likely to grow at roughly the same pace -- 1.7 per cent -- as this year.

The S&P report on France came as financial markets are putting heavy pressure on other members of the eurozone struggling to control their debt and public deficits, notably Portugal, Spain, Greece and Ireland.

Earlier yesterday another ratings agency, Fitch, lowered its note on Portuguese debt a notch, citing "deteriorating" near-term economic prospects and a likely recession next year.

Fitch on Tuesday warned that it could downgrade its rating on Greece, putting it below investment grade.

Moody's, a third leading agency, on Tuesday said it might may lower by one or two notches Portugal's A1 rating owing to uncertainty about growth and borrowing prospects.

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