Zut alors: Standard & Poor's downgrades France

It hasn't been Fran├žois Hollande's month: first there were violent protests over taxation. Now S&P has nixed France's AAA rating.

by Emma Haslett

Poor François Hollande. Over recent weeks the French president has endured strikes and violent protests by groups as diverse as lorry drivers, Breton farmers and football clubs, all of whom are outraged at various taxes he’s considering levying on their savings and income. Now, to add insult to injury, he has to stand by as the whole of the UK hides behind its hands and tries to suppress giggles after ratings agency Standard & Poor’s downgraded France’s credit rating from AAA to AA.

Over the past three years, the French government has brought in €60bn of new taxes: at 46% of GDP, France now has one of the highest tax burdens of Western economies. Hollande’s government has been one of the worst culprits: since he was elected in May last year, he has overseen more than 80 tax rises. S&P has clearly decided enough is enough.

‘The downgrade reflects our view that the French government’s current approach to budgetary and structural reforms to taxation, as well as to product, services and labour markets, is unlikely to substantially raise France’s medium-term growth prospects,’ said S&P, sternly.

‘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.’


To be honest, the first hint Hollande had gone too far was when French footballers started showing alarming signs of political motivation. At the end of last month, they abandoned their Ferraris and spray tan booths to protest a 75% ‘super tax’ on players earning more than €1m (£854,000). As a sign of their fury, France’s top football clubs cancelled a weekend of games (admittedly not quite protest on a poll tax riot level – but if poll tax rioters had expensive manicures to consider, things might also have been more genteel…).

The farmers of Brittany, on the other hand, went the whole hog with their protests against a new eco-tax on large vehicles. Donning the red bonnets of a 17th century tax revolt, they blocked roads with cauliflower (we’re not sure either – but ‘the choux fleur riots’ has a rather lovely ring to it) and attacked posts set up to monitor vehicles for the tax.

The problem is things seem to be getting even worse: figures out this morning showed in September, industrial output in the country fell 0.5%, as the trade deficit widened to €5.8bn, up from €5bn in the same period last year and €5.1bn in August.

Hollande, meanwhile, has been trying to put on a brave face, even as the sky falls around him. At a World Bank conference in Paris, he pointed out that market rates on French government debt are still only half a percentage point higher than Germany’s (which, when set against the likes of Greek and Italian debt, is pretty low) and that the tax rises are ‘the only [way we] can guarantee our credibility’.

The thing is, when even French footballers have stopped respecting you, you have to ask where exactly aforementioned ‘guaranteed credibility’ is going to come from. Not Standard & Poor’s, that much is clear…

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