The decision by Standard & Poor’s to downgrade France, together with Austria, by one notch is the moment many have dreaded, especially President Nicolas Sarkozy. But while it may pull the rug out from under the eurozone’s efforts (imperfect as they are) to contain the sovereign debt crisis, it is not the end of the world. The most likely outcome and the best hope is that it will not make all that much of a difference.
Sovereign credit ratings are per se irrelevant: they reveal no new information and should largely be foregone conclusions. S&P itself to some extent admits this by publicising a methodology based on the same sensible factors everyone else uses to assess sovereign risk. If ratings judgments have impact when they deserve none, it is because governments anoint them in that role, through formal regulation and rhetorical fetishism.
In the case of France, the fetishist-in-chief used to be Mr Sarkozy, who long insisted on the sanctity of the French triple A stamp. He and his government, seeing the way the wind was blowing, have recently tacked back to a feigned indifference. The one certain loser from a French downgrade is Mr Sarkozy himself: he will look weak at home months from an election, and he will have a weaker hand to play in eurozone negotiations.