PARIS (AP) — Fitch warned Wednesday that France risks losing its triple-A credit rating if Europe’s leaders don’t stop the eurozone crisis from worsening.
Fitch, along with the other major agencies, gives France its highest mark for creditworthiness.
But in a report published Wednesday, Fitch said a “further intensification of the eurozone crisis” would result in a much sharper economic downturn in France and the European Union, and that means France would risk losing its AAA rating.
Fitch’s warning comes days after another Moody’s, said much the same.
The more France has to pay to borrow money, the harder it will be to reduce its overall indebtedness.
On Wednesday, the yield on France’s 10-year bonds rose slightly to 3.62 percent — down significantly from last week’s high when it hit levels not seen since the euro was created in 1999. However, it’s still well above the 2.02 percent Germany pays.
As part of efforts to calm markets and improve France’s fiscal health, President Nicolas Sarkozy has vowed to slash the country’s budget over the next few years and balance it by 2016.
Finance Minister Francois Baroin defended the government’s program on Monday, after Moody’s warning. He also noted that France still borrows at a relatively low interest rate.
But France pays more than nearly every country that has a Triple A rating from all three of the major ratings agencies and any changes would likely increase borrowing costs further.
While no one is expecting France to default, its higher yields reflect investor concern about the country’s fundamentals: its overall debt load and the annual budget deficits it runs.