Embarrassing error by S&P downgrades French economy

Ratings agency Standard and Poor's has admitted it mistakenly announced to some clients a downgrade of France's top triple A credit rating.

B64/Wikicommons

The agency's embarrassing error came as the spread between France's 10-year government bond rates and Germany's hit new record highs, in a sign of markets' failing confidence in non-German eurozone debt.

"As a result of a technical error, a message was automatically disseminated today to some subscribers of S&P's Global Credit," S&P said in a statement. "This is not the case: the ratings on Republic of France remain 'AAA/A-1+' with a stable outlook and this incident is not related to any ratings surveillance activity.”

The agency said it was investigating the cause of the error as French Finance Minister Francois Baroin called on the European Securities and Markets Authority and France's Financial Markets Authority to launch probes into the mishap.

President Nicolas Sarkozy's government has launched an austerity programme and insists its finances are under control, vowing to balance its budget by 2016 despite the economic slowdown and trouble in eurozone neighbour Italy.

Many commentators warned on Thursday that the bond spread with Germany and rising French borrowing costs show that the markets already regard French debt as riskier than its perfect rating implies.

But Baroin insists that France will meet its deficit reduction targets. Baroin and Budget Minister Valerie Pecresse say they remain on course to reduce France's public deficit to three percent of GDP by 2013 and to balance the budget by 2016.