France loses triple-A rating in Moody’s downgrade

20 November 2012 11:26  [Source: ICIS news]

LONDON (ICIS)--Moody’s has downgraded France’s government bond rating, from AAA to AA1 with a negative outlook, as a result of market rigidity and a loss of competitiveness, the US credit ratings agency said on Tuesday.

Following Standard & Poor’s downgrade of the country’s long-term sovereign rating from AAA to AA+ with a negative outlook in January 2012, Moody’s stated that France’s long-term growth prospects are being undermined by inflexible labour, goods and services markets, and a “deteriorating” economic outlook on the back of subdued domestic and external demand.

The ability of the French government to respond to future eurozone shocks is also less certain, Moody’s said, due to faltering growth and potential increases to the country’s cost of financing.

“France's exposure to peripheral Europe through its trade linkages and its banking system is disproportionately large, and its contingent obligations to support other euro area members have been increasing,” said Moody’s in a statement.

“Moreover, unlike other non-euro area sovereigns that carry similarly high ratings, France does not have access to a national central bank for the financing of its debt in the event of a market disruption,” it added.

France’s CAC 40 index was down 0.2% from the previous close at 10:28am GMT, while morning trading was flat for Euronext Paris-listed companies Technip, Air Liquide, and Arkema.

By: Tom Brown
+44 208 652 3214

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