International Economics

Top Credit Agency Downgrades French Credit Rating


In September of this year, French President Francois Hollande unveiled a budget proposal designed to cut the country's annual budget deficit down to 3 percent of gross domestic product from its current 4.5 percent.

The main mechanism for closing the gap? Tax hikes on businesses and the wealthy, including a 75 percent tax on anyone earning over a million euros annually, as well as additional taxes on capital gains and dividends. The budget cut little in the way of public spending, however, and didn't make signfiicant reductions in the public sector workforce. 

Top credit ratings agency Moody's isn't impressed. It just cut France's top credit rating, according to Bloomberg:

France lost its top credit rating at Moody's Investors Service, which also maintained a negative outlook for Europe's second-largest economy, citing what it called a worsening growth outlook.

France was cut to Aa1 from Aaa, the rating company said yesterday. The Moody's downgrade follows one by Standard & Poor's in January and increases pressure on President Francois Hollande to find ways to bolster growth.

"France's fiscal outlook is uncertain as a result of its deteriorating economic prospects, both in the short term due to subdued domestic and external demand" and "structural rigidities" in the longer term, Moody's said in a statement in Frankfurt.

Standard & Poor's kicked France's credit rating down a notch in January, so this isn't entirely unexpected. It is, however, a reminder of the dim prospects for growth in France, where unemployment is currently higher than it's been in more than a decade. Via The Guardian:

Defending the downgrade, Moody's stated: "France's long-term economic growth outlook is negatively affected by multiple structural challenges, including its gradual, sustained loss of competitiveness and the long-standing rigidities of its labour, goods and the service markets.

"France's fiscal outlook is uncertain as a result of its deteriorating economic prospects, both in the short term, due to subdued domestic and external demand, and in the longer term due to the structural rigidities noted above."

Officially, French public debt hit 91 percent of GDP this year, which is the level at which many economists say that debt has the potential to becomes a serious drag on a nation's economy. The U.S. is on track to follow, with public debt projected to hit 90 percent of GDP in the next decade under the Congressional Budget Office's alternative fiscal scenario. 

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  1. Premier!

  2. More wreckers and kulaks trying to destroy the wonderful system. Why do so many hate the poor? Why are business owners so greedy, unwilling to go bankrupt to hire more workers? Why WHY WHYYHYHYYH!

    1. Fuckez Vous! That’s why.

      1. Too polite & formal…it should be fuck toi!

        1. I don’t know. The way they tutoy today, it’s almost the reverse of the way it used to was. “Vous” is likely to be taken as mockingly formal, so it fits.

      2. Fuckez Moi? Fuckez Moi? Non, fuckez vous!

      3. Va te faire foutre avec une baton grande (Fuck you with a large stick).

        Cursing in French: “it’s like wiping your ass with silk.”

        *Three years of high school French (and wikipedia).

        1. ‘un grand b?ton’, pas ‘une baton grande’

  3. Maybe if they went from a 35-hour workweek to a 30-hour workweek?

    Or, better yet, they could increase their ban on genetically modified crops to cover more products?

    Should they raise taxes even higher?

    There’s gotta be something else they can do! ’cause there ain’t no way they’re ever gonna slash the budget the way they need to–until there’s nothing else left to do.

    Incidentally, that’s the way it works here in the U.S., too. If we spend less this year than last year or less next year than this year, I’ll eat nothing but haggis for a week.

    1. They should lower the retirement age down to 40, that’ll fix it!

      1. Good idea!

    2. even freer healthcare

      1. One of these ideas has to work.

        And we could use them here in the U.S., too and get the same results!

        So, long as we don’t slash the budget.

  4. Bet if anyone brings up the French downgrade in the U.S, the Democrats will all scream “its because of AUSTERITY CUTS”, even though the ratings agencies took French tax increases into account.

  5. OT: Did Hamas leadership make a deal with Morsi to sacrifice Gazan children so Morsi could get an opportunity to play “peacemaker” to a gullible Western audience?

    Only his hairdresser knows for sure.

    1. It kind of is the Egyptian go-to move. Start a war with Israel, negotiate a settlement, get feted as someone the West can work with.

      1. It seems from Morsi’s comments, that it also lets him be seen, in the Arab Street, as the man who put Israel in her place.

        1. I’d laugh and laugh if Bibi lined up about 1,500 D9s and pushed the whole fucking strip into the sea.

        2. If Netanyahu buckles and agrees to a truce, he should be fired. Not invading Gaza in favor of ‘good diplomacy’ is a massive betrayal of Israel.

          1. An invasion of Gaza would be playing right into their hands. Hamas wants the propaganda points of a “blood-thirsty” Israel invading the Strip. There are currently no Israeli settlements, nor Jews of any nationality living in Gaza, it would feed directly into the Zionist invader meme they have constructed.

            1. There is no win. They invade lots of people die and in a few weeks or months the rockets start up again. They don’t invade: the rockets stop for a week or a month and then start up again.

            2. Not if every last Hamas fuckstick has gone on to Allah, HM. I’m not talking about a little plinky-plinky, I mean an invasion that will be Hamas’s gotertdammerung.

              1. I remember, as a child, every Passover a story is told that after the Israelites had successfully crossed the Red Sea, massive waves crashed down and their Egyptian pursuers drowned. Upon seeing that the Israelites’ safety was secure, a chorus of angels broke out into song. God turned to those angels and rebuked them, saying that joyful songs were not appropriate when thousands of his children were dying in the Red Sea.

                Then I remember what Egyptian children are currently being taught, and I weep.

                1. Creepiest part of that is the bearded guy getting aroused over in the corner.

            3. No. They will have the Evil Zionist narrative no matter what.

              You know what’s more important than having the right enemy in Arab lands? Victory. Arabs have no love for losers. At least no ‘please let me blow myself up’ love. That’s why all those alphabet soup groups pissed off to the Syrian refugee camps decades ago and haven’t done much since.

              Hamas can and must be crushed until it is another has-been group of losers.

              1. Notice how quiet things have been in the West Bank the last decade? That’s not an accident.

          2. Did you catch the quote on Insty this morning?

            “Back in mid-June, during the great Paris weapons show, the Rafael pavilion was absolutely the busiest around, and everybody wanted to look at the new, exciting, Iron Dome system, the greatest achievement in rocket defense ever. But by the end of the show, Rafael hadn’t made a single sale. The Arrow sold well, other systems did great ? Iron Dome wasn’t moving. So they contacted their big clients, the serious ones, and asked what gives. And those clients told them no one except Israel has any use for these things. Because in any normal, sane country, if some hooligans were to start targeting civilians with rockets ? the army would go and kill them.”

            1. And America, through Bush to Obama and before, is a part of that ‘restraint’.

            2. I can see Iron Dome being useful for a country like Singapore (another country bordered by potentially Islamo-crazy countries), which would need an anti-missile platform to buy it some time until the U.S. or ANZAC intervened on their behalf.

  6. Shrike: The taxpayers are making a profit! This is capitalism! It’s just banking! Nothing to see here!

    1. A little Bacon circa Animal House: “All is well!”

  7. “Growth?? That’s just so we can work more to feed corporations more profits. We don’t want growth! We want free shit! And if the government will just take it from other people, we’ll have it too!”

  8. This actually could be good, because it will give us a chance to test whether the Laffer curve peak is above or below 75%.

    1. I think when you hit 75%, we’re out of Laffer territory and into “killing the golden goose” territory. But then again, we are talking about the French.

      1. Most economists who’ve tried to figure it out have conjectured it’s somewhere between 60-80%, but there’s never been any real world data for those kinds of tax rates.

        1. People’s Republic of Korea? California?

          1. I don’t think you’re getting any data out of DPRK, and of course that’s kind of a weird economy in many other ways. Does Cali have 75% rates?

        2. 50’s!!! GOLDEN YEARS!!! 91 PERCENT!!!!!!!!

          -HuffPo Commenter

          1. 50’s with no Medicare or Medicaid. oh wait, they always seem to forget that part don’t they.

          2. No one actually paid that rate.

        3. but there’s never been any real world data for those kinds of tax rates.

          Where do you come up with this bullshit?

          1. Show me the real world data for an effective rate of 75%.

    2. This actually could be good, because it will give us a chance to test whether the Laffer curve peak is above or below 75%.

      This implies that the Laffer peak is at a uniform spot across all economies of similar per-capita size, which I doubt is the case. I think it’s more likely that the peak is different for each country, influenced by debt load, income / wealth disparity, regulatory burden, compliance rate, etc, and the only thing Hollande’s little experiment will show is whether or not 75% is the peak for France itself. Will still be nice to get some real world data on the subject from a modern, mostly capitalist economy, though.

  9. This one’s for Shriektard: Soros is going big on gold.


    Clearly another AM radio wingnut.

    1. That’s “long”, not “big”.

  10. The rating “grades” they come up with are retarded. What do they need so many As for? Its like the equivalent of not telling a child they failed.

    1. I’ wondering what a 0-100 scale lacks, myself.

  11. We are so very fucked. It basically seems that for a while now, the world economy has operated on the principle that as long as no one ever asks to see the money meant to pay back their loan, we were okay. But they came for the banks, and now governments.

    My prediction: A global agreement is reached to just have everyone quietly inflate their currencies, just sorting out this mess with only the silly little citizens getting screwed.

    1. A global agreement is reached to just have everyone quietly inflate their currencies, just sorting out this mess with only the silly little citizens getting screwed.

      You mean history repeats itself?

      A relatively free society sees an explosion in wealth due to their freedom, the parasite known as government steals the wealth and creates rules that make it difficult to create more, without new wealth being created the government pretends it can create wealth by debasing the currency, everything goes to shit.
      Wash, rinse, repeat.

    2. Just wait till they start demanding to see the gold that backs the money…

    3. Not here in Canada! Our currencies is joining IMF reserve status.



    4. “My prediction: A global agreement is reached to just have everyone quietly inflate their currencies, just sorting out this mess with only the silly little citizens getting screwed.”

      It’s important to remember that the goal of politicians (all over the world) isn’t to run their economies in the best way possible.

      It’s to get themselves reelected.

      The idea that election prospects are somehow tied to economic expectations is a libertarian conceit. It may work that way post economic collapse, but until that happens, politicians gain power by spending money. The more money they spend, the more power they get.

      It works that way here in the U.S., too.

      My prediction is that all governments everywhere (from California to Paris) continue to spend as much as they possibly can–until the markets make it so they can’t spend any more. The voters sure as hell aren’t about to stop them.

      1. until the markets make it so they can’t spend any more.

        How will markets stop them? They’ll keep spending anyway.

        You mean no one will buy their debt? I’m sure they can figure out a way around that through inflation or buying it themselves with pension funds or something.

        Eventually they’ll go after wealth instead of income because there will be no income to tax. And at that point there might actually be a revolution of some sort if the wealthy find funding a revolution preferable to funding a kleptocracy.

        1. go after wealth

          ding! And that seems to be the trait of every collapsing economic system.

          1. It always helps when the average rube doesn’t know the difference between income, money, and wealth.

        2. “How will markets stop them? They’ll keep spending anyway.”

          The same way it happened in Greece.

          At some point, the market looks at your risk of default and says, “Um…we’re not gonna lend you money at the old rates anymore”.

          People would still lend to Greece! It’s just that there’s no way Greece could afford to pay the interest the market is charging–and borrow enough to cover all of their budget.

          …so, they had to slash the budget. There are only three ways budgets get slashed that I can think of:

          1) Political will.
          2) In response to inflation
          3) The market cuts you off.

          1) Political will isn’t going to happen; unless it materializes from 2) inflation, which can suddenly make the political will materialize out of thin air; so, we’re left with waiting until the markets cut us off…

          California will slash spending–only–when they have no other choice. When they can’t raise taxes high enough to cover their budget, when the credit markets charge California more interest than it can afford to pay, when they have no other choice…

          That’s when California will slash its budget. That’s why Greece is slashing its budget. To whatever extent France is slashing their budget, it’s because they have no other choice. France, apparently, can’t raise its taxes high enough to placate the credit markets.

          That’s what Moody’s and S&P are telling us. That’s how the markets cut off government spending.

          1. You know what this is like?

            It’s like the union members who voted to reject the deal Hostess was offering and strike–while Hostess was in bankruptcy.

            Governments are like that. They won’t change course on spending just because it makes no sense! Just like the union members went on strike despite the fact that it made no sense.

            If the only way Hostess workers will stop striking is if there’s no other choice–if the company is liquidated and their jobs just don’t exist anymore? Then that’s the way it is with government spending, too. There’s no way they’ll change course on spending–becasue that’s who they are.

            They’re not there to the economic viability of Hostess. They’re there to suck as much blood out of the turnip as they can. Again, the politicians are there to get themselves reelected and perpetuate their power–not to ensure the viability of the economy.

            Ask Tony! He doesn’t give a shit what his program would do the economy–and neither do the overwhelming majority of our politicians.

            1. The difference between Hostess and governments is that Hostess can’t steal from its customers.

              Governments can. And as long as governments maintain their monopoly on the initiation of violence, that is exactly what they will do.

              1. The analogy is between Hostess’ union leadership and the politicians.

                All those union leaders knew to do was to strike to get what they wanted. Just becasue the company was in bankruptcy, didn’t matter–all they knew to do was strike.

                All the politicians know to do is to keep spending to stay in power. Just because it hurts the economy doesn’t matter–all they know to do is spend to stay in power.

                In both cases, the problem isn’t that the leaders in charge don’t know that what they’re doing is harmful–it’s that they can’t stop themselves even though they know what they’re doing is harmful.

                The only way the spending stops is when no one will give them any more money. They will never choose to stop spending. They can’t do that if they want to stay in power–and they want to stay in power.

          2. In the mean time they can get “creative”. Isn’t California currently trying to force private sector workers into its bankrupt public pension system right now?

    5. …as long as no one ever asks to see the money…


  12. Va te faire foutre, r?duire les d?penses.

  13. Just a preview of Illinois and California. It’s a horse race which one goes down first.

  14. You know who else downgraded the French’s credit rating?

    1. Bally’s Las Vegas?

    2. John Law?

  15. TOP.

    Credit Agency.

    1. Are they related to the MEN?

  16. The U.S. is on track to follow, with public debt projected to hit 90 percent of GDP in the next decade under the Congressional Budget Office’s alternative fiscal scenario.

    US national debt is at 16 trillion

    US GDP is at 15 trillion.

    So are you saying that the US will bring down its Debt to GDP ratio to 90% from above 100% over the next decade?

    By the way the studies which you do not site but you are getting your info from do not make a distinction between public debt and debt.

    You made that part up Sudderman.

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