When President Hollande was campaigning for the presidency against incumbent Nicolas Sarkozy, a central platform of his manifesto was that there should be no further austerity cuts, essentially arguing that by raising taxes on the wealthiest and targeted government spending, France could lift itself out of the economic doldrums. However, 18 months after his election, France is still in the economic slow lane and 4 out of 5 voters believe he will lose the next election were he to stand.
Unemployment is expected to hit a record level of 11% in the third quarter of 2013 when statistics become available, meaning that 3.3 million people are out of work. Ratings Agency S&P have seized on this as a major reason why they have reduced France’s credit rating by a notch to AA from AA+. France was stripped of its coveted AAA status two years ago.
S&P commented that: “We believe the French government's reforms to taxation, as well as to product, services and labour markets, will not substantially raise France's medium-term growth prospects and that on-going high unemployment is weakening support for further significant fiscal and structural policy measures.” On the positive side, S&P have rated the outlook for France as “stable” meaning that a further downgrade is unlikely in the next two years. S&P commented that high unemployment was hampering the government’s reforms which are designed to boost growth. They predict that government debt will climb to 86% of the nation’s GDP in 2015 and are not expecting unemployment to recede below the 10% mark until 2016.
Unsurprisingly, the French government does not share the S&P evaluation of the economic situation. Pierre Moscovici, the nation’s Finance Minister, insisted that S&P had made "critical and inexact judgements". He claimed that: "During the last 18 months the government has implemented major reforms aimed at improving the French economic situation, restoring its public finances, and its competitiveness."