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S&P spares France from rating downgrade



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Adds details on S&P's view and finance minister's reaction

PARIS, June 2 (Reuters) -Ratings agency S&P spared France on Friday the embarrassment of downgrading the country's sovereign debt, but remained cautious about the outlook on account of strained public finances.

S&P left the country's AA rating untouched after a regular review and said that the outlook remained negative due to "downside risks to our forecast for France's public finances amid its already elevated general government debt".

A downgrade would have been the second in six weeks after rival agency Fitch cut its rating at the end of April to AA- over concerns about potential political paralysis and social unrest after a recent unpopular pension reform was passed.

Finance Minister Bruno Le Maire told weekend newspaper Le Journal du Dimanche that S&P's decision to keep its AA rating was a "positive signal" and that the government's public finance strategy was credible.

S&P said that potential triggers for a downgrade could come in the form of prolonged economic slowdown or failure to rein in the public finances, notably by leaving public spending high.

Le Maire said that "several billion euros" in budget savings would be detailed later this month after a spending review for which he has asked each ministry to identify cutbacks worth 5% of their budget.

S&P said that it now expects a slightly smaller public sector budget deficit following a recent update of the government's long-term financial plans that aim to cut the deficit to 2.7% of economic output in 2027 from 4.9% this year.

The ratings agency also said that it looked positively on a reform of unemployment benefits last year and a law passed this year to raise the retirement age two years to 64, which sparked weeks of protests and strikes.



Reporting by Leigh Thomas; editing by Diane Craft and Will Dunham

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