Standard & Poor’s (S&P) has downgraded France’s credit rating from AA+ to AA, putting on the same level as Belgium and two places above Italy.
This is a blow to President François Hollande who has already had some of the lowest poll ratings in recent French history.
The country has relied on tax rises to reduce its annual budget deficit, but this effort, together with some reforms of business subsidies, bureaucracy and labour restrictions has not worked.
S&P said: “We believe the French government’s reforms to taxation, as well as to products, services and labour markets, will not substantially raise France’s medium-term growth prospects. Furthermore, we believe lower economic growth is constraining the government's ability to consolidate public finances.”
The government in Paris was not happy and said S&P had ignored the long-term effects of many of its initiatives, especially pensions and benefits reforms.
Finance minister Pierre Moscovici said: “They are underestimating France's ability to reform, to pull itself up. During the last 18 months the government has implemented major reforms aimed at improving the French economic situation, restoring its public finances and its competitiveness.”
Hollande has given in to protests against some business taxes, but in spite of the threat of a footballers' strike, has stood firm on a 75% rate on earnings over €1m. Clubs say this threatens "the death of French football".
French workers pay the highest aggregate tax rate in the EU.
Those who would have us pay more tax in the UK, be warned.