French president: Credit downgrade changes nothing

By Jamey Keaten

Associated Press

Published: Monday, Jan. 16 2012 10:46 a.m. MST

French President Nicolas Sarkozy, right talks with Spain's Queen Sofia during a ceremony at the Royal Palace in Madrid Monday Jan. 16, 2012.

Paul White, Associated Press

MADRID — French President Nicolas Sarkozy on Monday shrugged off his country's loss of its prized AAA debt rating, saying the downgrade by rating agency Standard & Poor's would change nothing.

The comments, his first since S&P lowered its score on France and eight European other countries on Friday, followed a successful auction by France of €8.6 billion ($10.9 billion) in short-term debt Monday. The yields, the interest rates charged by investors on the debt, fell — a sign investors still see the country as a good bet.

France won a further small reprieve Monday, when the Moody's agency confirmed that it would keep its top rating. However, the S&P decision could seriously impair Sarkozy's bid for re-election this spring.

Sarkozy told reporters he was unconcerned with the opinions of ratings agencies.

"We have to react to this (the downgrade) with calm, by taking a step back," he said at a news conference with the new Spanish Prime Minister Mariano Rajoy. "At the core, my conviction is that it changes nothing."

Sarkozy won support from Rajoy for a new European tax on financial transactions being pushed by France and Germany. Rajoy's center-right government took power last month, and had not previously stated its position on the tax.

The French president said the ratings agencies' decisions would not affect his policies, though he did acknowledge that France has work to do, saying that its deficits and spending were too high and that its growth was too slow.

He also noted that two of the three major agencies still rate France at triple-A, the highest rating. Fitch confirmed the rating last week. The S&P move was especially brutal for France, one of the world's biggest economies and a financier of bailouts for smaller, poorer eurozone countries.

There are more government auctions in Europe this week, including longer-term offerings from France on Thursday, so the European debt crisis will never be too far from investors' minds.

The news conference began combatively when Sarkozy refused to answer a question about whether France's downgrade would affect its ability to lead Europe out of the crisis and if it had any connection with the meeting between the French, Italian and German leaders scheduled for next week being postponed.

Sarkozy and German Chancellor Angela Merkel have taken the lead in proposing solutions to the crisis and major decisions are often hashed out at their meetings ahead of European summits.

"You don't have the latest information," Sarkozy blithely told the reporter, apparently referring to Moody's decision on Monday. The reporter rephrased the question two more times, but Sarkozy again refused to answer.

Later on, in response to other questions, he confirmed that the three-way summit would take place in February and spoke about the S&P downgrade.

Earlier, Sarkozy met with Spanish King Juan Carlos, who said he's confident France and Spain would help Europe find a way out of the crisis.

The king said the two nations were "struggling together for the advance of a unified and prosperous Europe in solidarity that confronts the crisis with strength."

Rajoy's Socialist predecessor also supported the financial tax championed by Sarkozy, but was ousted from office by Spaniards angry about the country's hurting economy and high unemployment.

The European Commission has estimated that the tax could raise as much as €57 billion ($72.2 billion) a year, funds that could be used to help reduce the substantial budget deficits crippling European economies.

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