International ratings agency Moody's affirmed its top AAA rating for France on Thursday but said it would watch closely the policies of new President Francois Hollande who favours growth above austerity.

"/> International ratings agency Moody's affirmed its top AAA rating for France on Thursday but said it would watch closely the policies of new President Francois Hollande who favours growth above austerity.

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MOODY'S

Moody’s affirms France top rating

International ratings agency Moody's affirmed its top AAA rating for France on Thursday but said it would watch closely the policies of new President Francois Hollande who favours growth above austerity.

Moody’s said it maintained France’s top rating but kept the outlook at ‘negative’, noting that while Hollande insists growth must come first, he has not made clear how he will implement his campaign pledges at a time of great eurozone strains.

The agency, one of the top three world credit assessors, said among France’s strengths were a large, diversified economy; robust institutions and competent administration; strong social cohesion; sound and innovative debt management and important reforms, especially in the public sector and the pension system.

On the negative side, the country faced high government expenditure; a relatively large government deficit and debt plus its exposure to potential new contingent liabilities arising from a further deterioration in the eurozone debt crisis.

It noted that socialist Hollande won office earlier this month on a platform of growth first above austerity but “the path to a robust economic recovery is not yet clear and remains an uncertain variable in France’s debt equation.”

Hollande’s medium-term fiscal consolidation and economic growth objectives are quite similar to those of former president Nicolas Sarkozy, Moody’s said, with the new president’s programme requiring some €100 billion ($1.25 billion) in savings or five percent of Gross Domestic Product.

The target of balancing the accounts by 2017 is “unprecedented in France and reflects the government’s challenge to catch up and ensure the medium- and long-term sustainability of public finances.”

“It is not clear yet how precisely this reduction in the growth rate of public spending is going to be achieved, given that the new administration is aiming to stabilise the size of France’s public sector, in contrast to the outgoing government which targeted reductions in the number of civil servants.”

Hollande’s “strong commitment to the achievement of sustainable public finances is credit-positive (but) we believe that the overall level of uncertainty regarding the government’s ability to achieve its fiscal consolidation and growth targets remains unchanged.”

Moody’s said it expected the picture to become clearer in the second half of the year.

In January, Standard and Poor’s cut its top AAA rating on France by one notch to AA+, with a negative outlook, citing the strains caused by the eurozone debt crisis.

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ECONOMY

Salvini dismisses Italy’s ratings downgrade, says outlook ‘stable’

Interior Minister Matteo Salvini on Saturday dismissed ratings agency Moody's decision to downgrade Italy's credit standing because of the government's controversial budget plans and said the country's outlook was "stable."

Salvini dismisses Italy's ratings downgrade, says outlook 'stable'
Matteo Salvini earlier this month at the headquarters of the General Union of Labor trade union in Rome. Photo: Tiziana Fabi / AFP
The current administration will “keep going for five years, despite the “ratings agencies and European Commissioners,” Salvini told reporters.
 
“We are here to solve the problems of the Italians, not bring down the government or let ourselves be intimidated by the ratings agencies, which have made glaring mistakes in the past — and which are wrong again this time,” he said.
 
“Italy is a solid country, its outlook is stable, the experts tell me that is what counts,” Salvini added.
 
On Friday, Moody's cut Italy's credit rating by a notch from “Baa2” to “Baa3”. It cited concerns about Italy's plans for larger deficits and the high public debt load as the country's populist government clashes with Brussels over its budget.
 
Late Thursday, the European Commission formally warned Italy that its budget 2019 plans were a serious concern, calling for “clarifications” by Monday noon.
 
 
The coalition government of Salvini's far-right League party and the Five Star movement (M5S) was to meet Saturday to discuss its budget. At the heart of the concerns is Italy's public debt, which amounts to 2.3 trillion euros, or 131 percent of Gross Domestic Product (GDP). That is the highest rate in the eurozone after Greece.
 
Brussels has demanded Italy cut spending and reduce its public deficit in order to pare down its debt pile.