Downgraded France Says It Needs More Time
However, many economists say that the greatest threat to France's economy is its stringent labor rules, which make firing difficult and expensive and thus deter hiring. The country has been losing global business for years to more dynamic economies like China's, while fighting unemployment of 10.8 percent and concerns about the future of the eurozone.
The French government is currently leading negotiations between businesses and unions in the hopes of reforming labor rules by the end of the year.
Moscovici pleaded for time Tuesday, arguing that the government had inherited a difficult economic and budgetary situation from former President Nicolas Sarkozy. He said the government is convinced it is now on the right path but that its reforms just need to take effect.
"It takes time to reverse the flow of things. It takes courageous decisions, and that's what we're promising to do," he told reporters.To the ratings agencies, critics and investors, he said: "Judge us on our results." Trouble for France would mean wider trouble for Europe. France and Germany, which underpin the group of 17 European Union countries that use the euro, have taken the lead in finding solutions to the continent's debt crisis. Any slip in France's clout could endanger its ability to lead negotiations. In an early sign of how the rating could affect the eurozone ability to solve its financial crisis, its bailout fund was forced to cancel a bond auction Tuesday. Officials with the European Financial Stability Facility said the downgrade caused a technical problem since the EFSF's rating is now higher than that of France, which is a major backer of the fund. EFSF CFO Christophe Frankel did not say how the glitch would be resolved but said he thought it could be. The EFSF has been replaced by the European Stability Mechanism, but is still handling the bailouts of Greece, Ireland and Portugal.
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