Standard & Poor's (S&P) dealt a blow to France's credit rating on Friday when it cut the country's credit from AA+ to AA. The financial services company said President Francois Hollande's efforts to restore growth in the country were not effective, according to a report by The New York Times.
S&P said Hollande's taxation and labor policies did not have a positive effect on France's growth. Although the nation's economy grew by 0.5% in 2013's second quarter, the unemployment rate at 11.1% pulled down its growth. It also did not support the European Union rules for cutting budget deficit, said the report.
The weakness in the economy of France and other countries in the euro zone might indicate the onset of deflation. Because of this, the European Central Bank reduced its benchmark interest rate from 0.5% to 0.25% on Thursday, the report stated.
On Friday, Mr. Hollande said he was determined to continue his government policies despite the lower credit rating. He cited the low interest rates that investors were demanding in order to hold French debt,The New York Times said.
Join the Conversation