France 'warning' over AAA rating


France's Budget Minister Francois Baroin said today keeping the country's AAA rating was "a stretch" and had an impact on economic policy decisions related to cutting the deficit.

In an interview on Canal+ TV, Baroin was asked whether France's plans to tackle its ballooning deficit had been announced in order to keep its AAA credit rating, which is the highest rating issued by ratings agencies.

He replied: "The objective of keeping the AAA rating is an objective that is a stretch, and it is an objective that, in fact, partly informs the economic policies we want to have."

The Budget Ministry later clarified that the target was "a demanding (objective) which we're committed to."

Talks are taking place on pension reform - a key part of the plan to cut the deficit - and France has frozen central government spending barring pensions and interest payments between 2011 and 2013.

France is also considering introducing a constitutional amendment that would set binding budget deficit limits.

Baroin added: "We must maintain our AAA rating, reduce our debt to avoid being too dependent on the markets, and we must do this for the long-term."

Fitch Ratings said on Friday the recently stepped-up dialogue in France was an important first step in addressing France's fiscal deficit.

France has forecast its deficit will come in at 8 per cent of GDP this year, and aims to bring it down to within the European Union's 3 per cent limit by 2013.