Fitch affirms France at 'AAA'; outlook negative

14 December 2012

A weakness in France's sovereign credit profile relative to most other 'AAAs' - except for the UK and US, the ratings of which are also on negative outlook - is the high and rising level of public debt.

The negative outlook is expected to be resolved during 2013 and indicates a slightly greater than 50 per cent chance of a downgrade. The resolution of the Negative Outlook through an affirmation of France's AAA' rating or a rating downgrade will be determined by an assessment of the following factors.

• The pace and ambition of economic reform. In the near-term, the prospective reform of the labour market will be a key indicator of the political and public support for substantive measures that would enhance competitiveness and the growth potential of the French economy necessary to underpin confidence in the long-run sustainability of public finances.
• An assessment of France's medium-term growth outlook in light of the headwinds from the eurozone crisis as well as progress and prospects for economic reform.
• The likelihood that the government will meet its deficit and debt targets and implement structural fiscal measures that provide confidence that public debt will be on firm downward path from 2014.
• The fiscal and economic risks associated with the eurozone debt crisis. An intensification of the crisis would place additional pressure on France's sovereign ratings.

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