Friday the 13th, the unluckiest day – and for France, it certainly proved unlucky.
As I reported a few weeks ago, Standard & Poor’s issued an ominous end-of-year warning to France that it faced a downgrade to its crème de la crème AAA credit rating.
And it wasn’t just idle chat.
The ratings agency backed up its words today by bumping France’s rating down by one level – to AA+. The move followed a similar warning from fellow agency, Fitch, which lowered its outlook on the country from “stable” to “negative.”
Earlier rumors that the downgrade was coming sent the euro to a 16-month low against the U.S. dollar.
France’s Finance Minister, Francois Baroin, reacted with a patented shrug of the shoulders and a Franco-defiant, “It’s not ratings agencies that decide French policy.”
Maybe so, Monsieur Baroin… but tell that to your president, Nicolas Sarkozy.
With the first round of the French presidential election looming in three months – and Sarkozy’s main Socialist challenger, Francois Hollande, whipping him in the latest opinion polls – Sarkozy is in big trouble.
Having painted himself as the only man to be trusted with France’s economy and to steer the country through Europe’s current storm, today’s news could be the final nail in the coffin.
Heck, Sarkozy even admitted to advisors back in October that “I’m dead” if France lost its AAA label, according to Le Canard Enchaîné. And with a record low 30% approval rating, right now, Sarkozy is effectively walking around wearing a guillotine as his necktie.
P.S. Standard & Poor’s didn’t just single out France for punishment. In evaluating the credit-worthiness of 15 out of the 17 eurozone countries, the agency also downgraded Austria’s debt. Reports suggest that Ireland, Italy and Spain also had their ratings cut today.