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S&P welcomes French reform, still cautious

PARIS -- Rating agency S&P took a watch-and-wait attitude to new French economic reforms on Friday, holding an already downgraded notation but with a negative outlook, while giving the benefit of the doubt to the government's determination to enact change.

The S&P decision holding its rating at “AA+” came four days after Moody's cut its top rating for the country by one notch to “Aa1” and warned that more could come.

The latest S&P statement used a slightly more optimistic tone about the outlook for reforms being pursued and enacted than had Moody's.

S&P, which downgraded France from top notch in January, referring to recent French announcements on the economy, said although the government was “determined to carry out budgetary and structural reforms” France's long-term outlook was “negative.”

It said: “After flat growth this year, we believe that the French economy will grow by 0.4 percent in real terms in 2013.”

This is about half the target of the government which is hoping for growth of 0.8 percent. The European Commission is forecasting growth of 0.4 percent for France in 2013.

Reacting to the statement, French Finance Minister Pierre Moscovici, underscored the government's “resolve” to “follow up on ambitious reforms to help in economic recovery and job creation.”

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