Not fast enough: S&P knocks French credit rating to AA from AA+

Francois Hollande, France's most unpopular president on record, continues struggling to find the right cure to dig out of financial crisis. Standard & Poor's cut the credit rating of Europe’s No. 2 economy on Friday citing poor economic growth prospects.

The agency also believes the government is incapable of significantly reducing government spending, according to a statement released on Friday.

President Hollande announced taxes will rise by $4.1 billion (3 billion euros) from next year, a modest number as the Socialist-led government decided to abandon plans to increase taxes on programs, which could lose millions of euros in revenue, which S&P sees as ‘constraining’ growth.

The long term sovereign credit ratings was downgraded one notch because the French government may fail to spur medium term growth, but still sees the economic situation as ‘stable’.

At the center of the downgrade is the lack of faith in President Francois Hollande’s “current approach” to tax reform and growth plans.  

France is cutting spending for the first time since 1958.

Prime Minister Jean- Marc Ayrault, in response to the downgrade, said the rating is still “one of the best in the world” and that the agency “didn’t take into account all the reforms”  Le Monde reports.

All three major rating agencies stripped France of top-grade triple-A status. France was bumped from its AAA level in July by Fitch, and in November 2012 was downgraded by Moody’s Investor Services to Aa1 from Aaa.

“We believe lower economic growth is constraining the government's ability to consolidate public finances," S&P said in a statement. The agency said there is less than a one-in-three chance they will change the rating over the next two years.

Last week Fitch upgraded Spain's rating after its central bank said it had exited recession.

Hollande’s approval rating of 26 percent as of October reflects the lukewarm reaction to his labor law policies, which make it easier to fire employees and lengthens the average work life. Hollande is also considering cutting France’s cushy pension benefits, which is highly unpopular

Gross domestic product will expand 0.2 percent and 0.9 percent in 2014, and then 1.7 percent in 2015, according to European Commission estimates.