French Officials Demand Inquiry Into S&P’s Downgrade 'Error'

French officials are outraged by an apparent “glitch” by ratings agency Standard & Poor’s which at first sent out a note to subscribers declaring it downgraded France’s AAA sovereign credit rating and then rescinded it, calling it the result of a “technical error.”

S&P said that France’s credit rating remained “AAA/A-1+” with a stable outlook, and assured that the incident was not related to any credit ratings surveillance activity.

S&P added that it is “investigating the cause of the error.”

However, the French Finance Minister Francois Baroin was not amused by this “mistake.”

His ministry has demanded that France's AMF securities regulator and the European Securities and Markets Authority commence an inquiry into the matter.

Francois Baroin...has asked the relevant regulators… to conduct an inquiry into the causes and possible consequences of this error, the ministry said in a statement.

France is in the midst of releasing a new five-year, 65 billion euro budget saving plan to assure investors that Paris is committed to its austerity program.

The erroneous note by S&P actually had a practical impact n the market -- yields on French bonds surged to 3.46 percent, about a 20 basis point jump, on fears of a downgrade.

One French official told the Financial Times: “Can you believe this. This is not going to please people. They say it is a mistake. It is very strange to say the least. In the situation we are in at the moment you can’t play around like this.”

Another trader told FT: “We are furious with S&P. To make such a mistake in this febrile market with worries over France’s triple A is highly is irresponsible and alarming. French bond yields have been under pressure all day and then this false statement comes out and sends yields spinning higher.”

In early August, S&P was widely lambasted for downgrading the U.S, government credit rating by one notch from AAA to AA+ for the first time in history.