PARIS (MNI) – France’s sovereign debt remains of high quality and
without risk for investors, Finance Minister Francois Baroin reiterated
Tuesday, noting that borrowing rates remain at “historical lows.”

After the bombshell of a credit rating downgrade by Standard &
Poor’s that rattled the government’s fiscal strategy, the minister
highlighted the confirmation by two other ratings agencies of France’s
triple-A status. He said all the agencies recognized the coherence of
the government’s fiscal policy and the positive impact of structural
reforms.

“Nobody questions the quality of French debt,” Baroin told the
press in his New Year’s greetings.

The one-notch downgrade by S&P on Friday focused mainly on the
risks France carries as a result of the Eurozone sovereign debt crisis,
Baroin argued. While the governance of monetary union is “not optimal,”
the accord of European leaders late last year on a new fiscal compact
will “very largely” correct these problems, he claimed.

The Eurozone bailout fund, EFSF, which also suffered a downgrade
Monday, retains its full firepower and does not need to be enlarged
ahead of a scheduled review in March, Baroin said.

Along with Baroin, Budget Minister Valerie Pecresse highlighted the
importance for the government’s reform strategy of a summit of trade
unions and employers to be held Wednesday. With three months remaining
before the presidential election this spring, the government has said it
will make important fiscal policy decisions only after that summit is
held.

The overriding goal is to sound out the social partners on a
package of reforms to be unveiled at the end of the month, aimed at
making domestic firms more competitive by transferring part of their
social welfare contributions to another tax base, most likely to VAT
taxes.

The New Year will bring an “acceleration of reforms,” Pecresse
said, pledging that efforts at budget consolidation would continue in
order to lower the public deficit to 4.5% of GDP from nearly 5.7% last
year.

Trade Minister Pierre Lelouche said that firms’ competitiveness
already improved last year and the number of exporters increased by 3%.
While the trade deficit is likely to have reached a record high last
year, it should be closer to E70 billion than the E75 billion projected
previously, he said.

[TOPICS: M$F$$$,M$X$$$,MGX$$$,MFX$$$,M$$CR$]