* S & P keeps negative outlook on French rating
* Says government is committed to reforms
* Business morale improves more than expected
By Leigh Thomas
PARIS, Nov 23 Standard & Poor's rating agency
confirmed France's long-term rating of AA+ on Friday and
negative outlook but warned the government was likely to miss
its public deficit target next year.
Days after rival Moody's stripped France of its Aaa rating,
S&P applauded the Socialist government's plans to help restore
France's competitiveness largely with tax credits to companies.
However, the ratings agency warned that the public deficit
was set to miss the government's target of 3 percent of national
output next year, estimating a budget shortfall of 3.5 percent.
"The affirmation reflects our opinion that the French
government remains committed to budgetary and structural reforms
that would build on the measures it has proposed so far and
improve the country's growth potential," it said in a statement.
Moody's downgraded France one notch to Aa1 on Monday from
its to Aaa grade, taking a more skeptical view that reforms
undertaken so far by the government would be sufficient to
restore the country's waning international competitiveness.
That move, which followed a downgraded by S&P in January,
added pressure on President Francois Hollande's government on
the economy as it struggles to rein in surging unemployment.
In a break with a steady stream of negative economic data,
figures published on Friday showed industrial morale rose more
sharply than expected in November, rebounding from a more than
two year low in October.
National statistics institute INSEE said its indicator for
morale in the manufacturing sector rose to 88 from 85 in
October, beating a Reuters forecast for a reading of 86.
Business morale has been steadily declining in recent months
as Hollande hiked corporate taxes on big companies as part of
France's toughest belt-tightening drive in at least three
However, Hollande unveiled plans this month to improve
firms' international competitiveness by with 20 billion euros of
tax credits to companies and wants to launch a labour market
reform early next year.
"Our baseline expectation is that the government will press
ahead with further important structural reforms, despite
opposition from vested interests which benefit from
long-entrenched entitlements," S&P said.
"Substantial reforms would underpin the government's fiscal
consolidation strategy, in our view, and improve economic growth
prospects," it added.
France's benchmark 10-year bond yields are holding at just
over a historically low rate of two percent, giving Hollande
crucial access to cheap borrowing.
The government has stressed it will stick to the 3 percent
deficit target for next year. However S&P's forecast that it
will fall short of that target matches expectations by the
European Commission, International Monetary Fund and a number of