Fitch affirms France "AAA", says no room for slippage

PARIS Fri Dec 14, 2012 3:23am EST

The skyline of La Defense is seen behind Paris' landmark, the Arc de Triomphe, November 20, 2012. REUTERS/Christian Hartmann

The skyline of La Defense is seen behind Paris' landmark, the Arc de Triomphe, November 20, 2012.

Credit: Reuters/Christian Hartmann

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PARIS (Reuters) - Fitch Ratings stuck by its triple-A rating on France in a much-awaited review on Friday but warned that an expected peak in debt in 2014 was the limit it could agree to for a country with a top-notch credit grade.

Fitch is the only agency to retain an AAA rating on the euro zone's second-largest economy. It kept to its negative outlook, saying that indicated a slightly greater than 50 percent chance of a downgrade in future.

Fitch said it was raising its forecast for the country's debt in 2014 to 94 percent of gross domestic product from an earlier 92 percent - higher than any other top-rated sovereign except the United States and Britain.

"This is at the limit of the level of indebtedness consistent with France retaining its 'AAA' status assuming the government debt is firmly placed on a sustainable downward path from 2014," Fitch said in a statement.

French Finance Minister Pierre Moscovici called Fitch's rating an "encouragement" and a "motivating force" that confirmed the government was right to pursue its debt reduction targets.

"It's a pointer for the way ahead. My take on this is that the French economy is solid and can be trusted, and it is absolutely essential that we keep to the path we have mapped out: European construction, budget solidity and competitiveness," he told Europe 1 radio.

Last month, Moody's cut France by one notch from AAA to Aa1 - causing only muted investor reaction - following a similar downgrade by Standard & Poor's in January.

(Reporting by Alexandria Sage; editing by Patrick Graham)

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