Why the US and France are credit risks and the UK is not

Christian Noyer, the chairman of the French central bank is complaining that Britain's bonds should be downgraded rather than those of France because the UK economy is in worse shape.

I am not an economics major, but I have had enough experience of the bond markets to know that a bond rating is an estimate of the risk of default. UK bonds have a high rating because the UK borrows in its own currency. There is no risk of default because however short of cash the government might be, the Bank of England will always print more. This is not a painless option, increasing the money supply will feed inflation and reduce the value of the pound relative to other currencies. But this represents a currency risk rather than a default risk.

France does not borrow in its own currency because it does not have one. France has to borrow in Euro and if they run short the only way they can make more is to either persuade every other member of the Eurozone of the need to print it or leave the Euro and reintroduce their own national currency. That will not happen unless the Germans either suddenly lose their fear of inflation or leave the Eurozone. So whatever the state of the UK economy, there is a real possibility that France might default on Euro bonds while a UK default is a purely theoretical possibility.

If the reason that the UK gets a AAA rating is that it borrows in its own currency, why then (beyond politicing) did S&P give the US a lower rating?

The sole cause of the US ratings downgrade is the US Republican party. Not the deficit, not the debt, not the state of the economy: The Republican party. Even though the US borrows in its own currency, the markets have suddenly discovered that the US Treasury might not be able to print as much money as it needs to repay its debts. And the reason that it has made this discovery is the GOP attempt to use the debt ceiling limit for political brinksmanship. The effect of this discovery is that a US default is no longer a purely theoretical possibility, there is a real (albeit small) chance that the brinksmanship will lead to catastrophe.

A divided government in which the executive and legislative powers are held by opposing parties cannot exist in the UK parliamentary system and so a manufactured political crisis cannot result in a default as we now know it can in the US.