France warns on credit rating

France admitted on Sunday that keeping its top-notch credit rating would
be “a stretch” without some tough budget decisions, following German
hints that Berlin may resort to raising taxes to help bring down its deficit.

Euro zone
trade unions are preparing for possible confrontations in the coming week if
governments impose austerity measures or labor reforms unilaterally.

But ministers
made clear they were ready to take unpopular steps to prevent the Greek debt
crisis spreading to their economies, although doubts are growing about whether
the Spanish government in particular has enough support to get its way.

Minister Francois Baroin indicated on Sunday that France should not take for
granted its AAA rating, which allows Paris to borrow relatively cheaply on
international markets and finance its big budget deficit.

objective of keeping the AAA rating is an objective that is a stretch, and it
is an objective that, in fact, partly informs the economic policies we want to
have,” Baroin said.

“We must
maintain our AAA rating, reduce our debt to avoid being too dependent on the
markets, and we must do this for the long term,” he told Canal+ TV in an

Baroin later
clarified that the target was “a demanding (objective) which we’re
committed to.”

France has
forecast its deficit will hit 8 percent of gross domestic product this year,
but aims to bring it down to within the European Union’s 3 percent limit by 2013.

Talks are
under way on pension reform and Paris has frozen central government spending,
barring pensions and interest payments, between 2011 and 2013. It is also
considering a constitutional amendment to set binding budget deficit limits.

budget problems are less severe but Finance Minister Wolfgang Schaeuble
signaled at the weekend that Germans may have to stomach tax rises as well as
spending cuts.