French PM Francois Fillon gives news conference in Paris
Mr Fillon says the downgrade decision had been expected

French PM Francois Fillon has defended his government’s economic policies following the decision by ratings agency Standard and Poor’s to downgrade the credit rating of France.

He said the government would push ahead with reforms and debt reduction.

Standard and Poor’s said Europe’s austerity and budget discipline alone were not sufficient to fight the debt crisis and may become self-defeating.

The downgrade stripping France of its top AAA rating was announced on Friday.

The government is on a communications campaign to tell the French there is no need to panic and that the policies of reform and debt reduction will continue as planned, says the BBC’s Hugh Schofield in Paris.

Mr Fillon told a news conference that if France was in the firing line, it was primarily because of its exposure to the crisis in the eurozone.

“This decision constitutes an alert which should not be dramatised any more than it should be underestimated,” he said.

“This decision was expected, even if one could find it came at the wrong time, given the efforts made by the eurozone, which investors are starting to see.”

It was not government policies that were under attack from the ratings agency, he said, and so those economic policies would be maintained, with the goal of cutting spending and bringing the annual budget back into surplus by 2016.

Crisis jargon buster
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Credit rating

Credit rating
The assessment given to debts and borrowers by a ratings agency according to their safety from an investment standpoint – based on their creditworthiness, or the ability of the company or government that is borrowing to repay. Ratings range from AAA, the safest, down to D, a company that has already defaulted. Ratings of BBB- or higher are considered “investment grade”. Below that level, they are considered “speculative grade” or more colloquially as junk.

‘Long road’

German Chancellor Angela Merkel also spoke on Saturday, saying Europe still had a “long road” ahead to restore investor confidence, after the multiple credit rating downgrades of nine eurozone countries in total.

On Friday, S&P’s said France was being downgraded one notch, to AA+. The country still has a top AAA rating from the other two main ratings agencies, Moody’s and Fitch.

S&P’s also said Italy, Spain, Cyprus and Portugal were cut two notches, with the latter two given “junk” ratings. Germany kept its AAA rating.

Austria, Slovakia, Slovenia and Malta were the other countries downgraded.

Credit ratings are used by banks and investors to decide how much money to lend to particular borrowers.

The cut in the so-called sovereign ratings of governments is likely to lead to most other borrowers domiciled in the same countries – including banks and companies – being downgraded.

Although the move has been widely expected, it is still likely to make it somewhat more difficult and expensive for borrowers from those countries to raise money, including for the governments themselves.

Country Old Rating New Rating Cut
Austria AAA AA+ One notch, loses top rating
Belgium AA AA None
Cyprus BBB BB+ Two notches to junk
Estonia AA- AA- None
Finland AAA AAA None
France AAA AA+ One notch, loses top rating
Germany AAA AAA None
Ireland BBB+ BBB+ None
Italy A BBB+ Two notches
Luxembourg AAA AAA None
Malta A A- One notch
Netherlands AAA AAA None
Portugal BBB- BB Two notches to junk
Slovakia A+ A One notch
Slovenia AA- A+ One notch
Spain AA- A Two notches