President Nicolas Sarkozy struggled Saturday to contain the damage after France was stripped of its top triple-A credit rating just three months ahead of the right-wing leader’s re-election bid.
He sent his prime minister to face the press and try to convince skeptical voters that Standard & Poor’s rating was just one indicator of economic health and that France was still a safe country trusted by investors.
“This decision constitutes an alert which should not be dramatised any more than it should be underestimated,” Francois Fillon told reporters in a televised conference.
But Sarkozy’s main opponent in the presidential race, Francois Hollande, pointed out that Sarkozy had staked his reputation on keeping the prized rating but now, he said, it was clear that he had failed miserably.
“It is (his) politics that have been downgraded, not France,” said the Socialist who the polls say will win the vote to be held in April and May.
Standard & Poor’s on Friday cut France’s top triple-A credit rating, which it has held since June 1975, by one notch to AA+.
Analysts said the downgrade of France has widened a gulf between Europe’s north and south, leaving Paris politically weaker and Berlin stronger amid tough negotiations to resolve the eurozone crisis.
For months Germany, Europe’s top economy, has sought to impose its frugal philosophy on eurozone partners while Sarkozy served as a counterweight to Chancellor Angela Merkel’s hard line.
France’s newspapers were full of doom and gloom on Saturday, with many focusing on the fact that Germany had managed to hang on to its top rating while France had been kicked out of the premier league.
Le Parisien’s front-page headline read: “What will change after the downgrade”, while inside articles warned that French companies might face a credit crunch and workers might end up paying more tax.
Sarkozy — who hosted crisis talks with his top economics ministers at the Elysee on Friday — reportedly told allies last month: “If we lose the triple-A, I’m dead.”
He had staked his re-election bid on convincing voters that he was the only candidate with the stature and experience to save France from economic meltdown.
He justified pushing through two austerity packages as necessary to defend France’s triple-A rating.
But Friday’s downgrade left a sizeable hole in his reelection campaign.
“It is the end of the myth of the protecting president,” said far-right National Front leader Marine Le Pen, who polls put in third place in the election race.
The downgrade added to already bleak economic figures for France, where unemployment is pushing towards the three million mark.
INSEE, the national statistics office, says it expects France to fall into a brief recession, with the economy contracting 0.2 percent in the three months to December and another 0.1 percent in the first quarter of 2012.
The eurozone economy plunged back into crisis on Friday as France and Austria were stripped of their top ratings and Standard & Poor’s downgraded a swathe of debt-laden EU members.
Only Germany escaped unscathed, as all other eurozone members were either downgraded — some by two notches — or else warned their current ratings were being re-examined amid fears about sovereign deficits.
S&P said the downgrade of France “…reflects our opinion of the impact of deepening political, financial, and monetary problems within the eurozone.”
It said the outlook on the long-term rating on France is negative, which indicates that it believes that there is at least a one-in-three chance the rating could be lowered further in 2012 or 2013.