The market has effectively downgraded French debt already. The spread between 10-year French government bonds and German bunds has widened to 0.85 percentage point this week, three times wider than a year ago. Some of this is down to concern about France’s own credit quality: France’s debt to GDP ratio is forecast to hit nearly 90% in 2013, the highest among remaining triple-A rated countries. Last year, France ran a budget deficit of 7%; only Spain, Portugal, Greece and Ireland among euro-zone countries were higher.<\/p>\n
True, Paris has a plan\u201d\u201da crucial difference between France and the recently downgraded U.S., according to Standard & Poor’s. The government has pledged to cut the deficit to 4.6% of gross domestic product next year and 3% in 2013 even if growth falters. But its forecasts are based on an optimistic assumption of annual GDP growth of at least 2% for the next three years; French taxes are already high so if growth falls short the bulk of any further fiscal tightening will need to be via politically tricky spending cuts.<\/p>\n