France Gets A Rating Agency Cut Over Policies

France's credit rating has been downgraded by the rating agency Standard and Poor's.

The company's reassessment drops the French rating by one notch to AA, with the outlook stable.

It deals a further blow to President Francois Hollande's embattled socialist government.

France's 10-year borrowing costs jumped after the announcement, with bond yields increasing to 2.389% from the 2.158% close of trading position on Thursday.

President Hollande has been criticised over his government's policies

S&P said it was cutting the rating from the previous AA+ because government reforms would not raise medium-term prospects and because lower economic growth was constraining the ability to consolidate public finances.

"We believe the French government's reforms to taxation, as well as to product, services and labour markets, will not substantially raise France's medium-term growth prospects," S&P said.

"And that ongoing high unemployment is weakening support for further significant fiscal and structural policy measures."

It added: "Moreover, we see France's fiscal flexibility as constrained by successive governments' moves to increase already-high tax levels, and what we see as the government's inability to significantly reduce total government spending."

In a statement French finance minister Pierre Moscovici deplored "the critical and inexact judgements" made by the agency.

French Prime Minister Jean-Marc Ayrault queried the S&P downgrade

And Prime Minister Jean-Marc Ayrault said "France's ratings remains among the best in the world" and that the agency "does not take into account all the reforms" made by the government.

S&P said it expected net general government debt to peak at 86% of gross domestic product (GDP) in 2015 and unemployment to remain above 10% until 2016.

"Current unemployment levels are weakening support for further fiscal and microeconomic reforms, and are depressing longer term growth prospects," it said.

Germany's luxury car market is a world leader for the sector

The downgrade comes on the same day Germany revealed a record trade surplus in September, as exports rose and imports dropped in a development underlining criticism that Europe's largest economy is relying too heavily on foreign trade.

The Federal Statistical Office said exports were up 1.7% to €92.8bn (£77bn) in September over August. Imports dropped 1.9% to €73.9bn (£61.5bn).

A week ago the United States criticised Germany for its large trade surplus, saying it was causing troubles in the euro-area debt crisis for its neighbours and urged a push for more domestic-led growth.

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