S&P cut France’s credit rating to “A+/A-1” from “AA-/A-1+” in response to the growing political instability in the country. This will translate into a lack of investment and a bad outlook for the economy. Even Reuters was surprised by the downgrading, which comes ahead of regular reviews.
A lower rating means higher debt-refinancing costs, aggravating the debt crisis. We will see on Monday, Oct. 20, whether the downgrade had an effect on French yields, which, meanwhile, were back to a slightly lower level than Italian yields.
In a world of sovereign nations, where national credit is based on domestic debt, ratings by private actors on sovereign debt are insignificant. In the current anti-Westphalian system in which national credit is based on foreign-owned national debt, the sovereign is the financial oligarchy, which can exert pressure on national governments. French debt downgrading is further evidence that Jacques Cheminade is right
when he calls for “a popular unity against the financial oligarchy.”
