Today it was announced that France lost its AAA credit rating whilst the world’s stock markets slid. Can this really be considered as a surprise though as recently a high percentage of EU countries have had their credit ratings reduced?

Since France has had its AAA rating since 1975, the country is now suffering from a lack of pride and will face higher borrowing costs. Naturally, the French aren’t happy with the fact that Britain hasn’t had a downgrade (yet) and have expressed this anger. Michael Fuchs, a member of the Christian Democrats, said: “If the agency downgrades France, it should also downgrade Britain in order to be consistent”.

France’s loss is also bad news for President Nicolas Sarkozy who plans to re-run for office in the election this May. The downgrading of France will reflect poorly on him.

The problem with the downgrade of credit ratings is it can affect the UK’s economy as if any countries fall out of the euro then it will destabilise the whole world’s economy.

Standard and Poor, the credit rating agency, have now downgraded many countries credit ratings, so it may be only a matter of time before Britain’s is also reduced. At this present point of time the credit rating agencies have confidence in the British currency because of the austerity measures that the current coalition government have put in place.

Economists can no longer predict the future of the economy because we have never been in this situation before. Previously, before the Euro was introduced, all of the countries that now use the euro had their own currencies which were allowed to achieve their own value within the world. However since the advent of the euro, over some 10 years ago, this has not been the case.

So to answer the question, ‘Where are we heading?’, the response simply seems to be that nobody knows.