China's Dagong cuts France's credit ratings

Feb 16, 2015 12:00 AM

A Chinese rating agency has downgraded France's sovereign credit ratings, citing concerns about the country's debt repayment. China's Dagong Global Credit Rating Co. said in a statement it cut both the local and foreign currency sovereign ratings to A from the previous A+

"The debt repayment environment of France remains stable but still faces many challenges," Dagong said, citing increasing pressure from long-term economic sluggishness on government efforts to pursue structural reforms.

"Weak economic growth has delayed the fiscal consolidation process," the agency said.

"The fiscal deficit and the debt burden ratio have climbed up further, which have weakened the government's debt repayment capability."

France's economy, the eurozone's second largest, expanded by a mere 0.4 percent last year as investment slumped.

The government has so far been unable to kickstart much-needed growth in a country beset by record unemployment even as President Francois Hollande has launched a two-pronged attack to tackle joblessness and push for growth.

Dagong, founded two decades ago, remains far less prominent than its long-established Western competitors, though it has begun making a splash in international media.

It hit the headlines in August 2011 when it cut its main rating for US sovereign debt from A+ to A, with a negative outlook, after a standoff over Washington's debt ceiling that led to fears of a potentially globally destabilising US default.

Standard & Poor's of the US also slapped Washington with a credit downgrade that month, reducing it one notch to AA+ and denying it a coveted AAA rating for the first time.

Dagong struck again in October 2013, whittling the US sovereign credit rating down to A- after another debt deadlock saw a two-week government shutdown.

Dagong has sought to take advantage of global anger with the so-called big three agencies -- S&P, Moody's and Fitch -- which were widely criticised for having given their highest ratings to the debt instruments whose failure helped spark the global financial crisis in 2008.

 

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