The French government (justifiably, if you ask me) is demanding an explanation as to why the S&P accidentally reported that it had downgraded France's credit rating.
The Financial Times examines why the mistake is important.
French 10-year bond yields leapt to 3.46 per cent – a 27 basis point rise on the day – while the country’s extra cost to borrow over Germany rose to a euro-era record of 168bp, a 21bp jump on the day.
Standard & Poor’s was forced to put out a statement: “As a result of a technical error, a message was automatically disseminated today to some subscribers of S&P’s Global Credit Portal suggesting that France’s credit rating had been changed.
“This is not the case: the ratings of Republic of France remain triple A with a stable outlook and this incident is not related to any ratings surveillance activity. We are investigating the cause of the error.”
S&P’s Global Credit Portal, the company’s subscriber service, used by banks and investors in financial centres, published the mistake at about 3pm. Its analysis of France had been linked in a section on its website entitled “downgrade”.
The mistake was greeted with anger in Paris where the government is fighting to defend its triple A status – including unveiling a €65bn five-year supplementary budget saving plan this week aimed at convincing markets and the rating agencies that it is determined to stick to its fiscal consolidation targets.The Globe and Mail takes a look at what might happen next. And Expatica.com notes that the anger in France is palpable.
The incorrect information about a downgrade came on the same day that France rebuffed calls from the European Union to advance more austerity plans that it already has, Reuters notes.
Forecasting lower growth in France than the government, EU Economic and Monetary Policy Commissioner Olli Rehn urged further steps to ensure France is able to cut its public deficit to an EU limit of 3 percent of gross domestic product in 2013 from an estimated 5.7 percent this year.
But French Finance Minister Francois Baroin and Budget Minister Valerie Pecresse said the latest saving measures had built in leeway to offset the impact of lower than expected growth both in 2012 and 2013.
"The commitment to bring the deficit down to 3 percent of GDP in 2013 and then to balance in 2016 will be met." The 2012 budget had six billion euros ($8 billion) of wiggle room, they said in a statement.