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Fitch affirms France credit rating, warns 6 others

- Associated Press - Friday, December 16, 2011

LONDON — The Fitch ratings agency affirmed France's top Triple-A credit rating on Friday, but warned it could downgrade six other nations that also use the euro — Italy, Spain, Ireland, Belgium, Slovenia and Cyprus.

Fitch Ratings said France's credit grade is supported by the country's wealthy and diversified economy and noted that President Nicolas Sarkozy's conservative government has adopted several measures to strengthen its finances.

It said, however, that France's debt is expected to rise to a peak of 92 percent of GDP in 2014. As a result, the agency revised its outlook for France to negative from stable. That indicates a slightly greater than 50 percent chance of a downgrade over a two-year horizon. Unless the eurozone debt crisis worsens significantly, Fitch expects no change in France's rating until 2013.

However, Fitch did warn it could downgrade some of the eurozone's other big economies, notably Italy and Spain. It said that following last week's EU summit, it "has concluded that a 'comprehensive solution' to the eurozone crisis is technically and politically beyond reach."

It expects to complete the review of the six eurozone nations targeted Friday by the end of January. It is considering downgrading them one or two notches each.

Three of the eurozone's 17 nations have already received bailouts — Greece, Ireland and Portugal. Investors fear that Italy and Spain's borrowing costs have risen so rapidly that they could also need financial aid. Both are considered too big for Europe's bailout fund to rescue.

French officials and investors had feared that France could get downgraded, which would have severe repercussions on European efforts to contain the debt crisis. France and Germany's AAA credit ratings underpin the rating for the eurozone's bailout fund.

French Finance Minister Francois Baroin, in a statement responding to the Fitch announcement, sought to highlight the relative health of his country's financial situation. He noted the government recently took a major reform to rein in state pensions.

"The government is determined to continue its action to foster growth, competitiveness, jobs and the reduction of state debt," the statement from Baroin's office said.

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