S&P cuts France’s credit outlook to negative

Standard and Poor’s has cut France’s credit outlook to “negative”, due to concerns about the country’s struggling economic recovery.

However, the credit rating agency affirmed France’s AA/A-1+ rating, the third-highest rating.

“We believe that…a recovery of the French economy could prove elusive,” said S&P in a statement.

France’s finance minister, Michel Sapin, said the country’s debt was “one of the surest in the world”.

“We will pursue the needed reforms, to boost our medium term growth prospects,” Michel Sapin said in a statement.

“French debt is one of the surest and most liquid in the world, with debt levels very much contained,” he continued.

Official figures from the Bank of France showed that the French economy did not grow at all in the second quarter, and for the third quarter it is forecasting growth of 0.2%.

“We believe that…a recovery of the French economy could prove elusive and that France’s public finances might deteriorate beyond 2014,” S&P said.

S&P added that it expected France’s budget deficit will average 4.1% of GDP between 2014 and 2017, an increase from earlier projections of 3.2%.

The French government has also said it will reduce its budget deficit to below the EU threshold of 3% of GDP by 2017, two years later than promised.

S&P said the negative outlook indicated a one in three chance that certain events would occur which would push it to downgrade France’s actual credit rating within the next two years.

For now, S&P said France’s high income per capita and productivity, recovering competitiveness and profitability among French companies, and France’s stable financial sector justified the country keeping its current rating.

S&P last downgraded France in November 2013 when it cut its rating to AA.