France Shrugs off Moody's Downgrade
French Economy Minister, Pierre Moscovici, leaves the Elysee Palace after a cabinet meeting in Paris, France, 28 September 2012. Photo by EPA/BGNES
The French government has downplayed the importance of rating agency Moody's decision to deprive the country of its top triple-A credit rating.
Moody's downgraded France's debt from Aaa to Aa1, and kept its negative outlook, meaning it could be cut again.
Moody's blamed stalled economic growth, the risk of a Greek euro exit and the risk that France has to contribute to bailing out other eurozone countries.
"Judge us on our results," French Finance Minister Pierre Moscovici said.
Moscovici said the downgrade was motivation to pursue structural reforms and threw the blame for it on the economic management of previous governments.
Rival ratings agency Standard & Poor's downgraded France from AAA in January. Of the big three agencies, only Fitch still gives France its top rating.
"The rating in no way places a question over the fundamentals of our country's economy - neither the reforms undertaken by the government, nor the quality of the signature on our debt," said Moscovici.
He pointed to the fact that Moody's had only downgraded its rating of the country's long-term debts by one notch, and still gave France's short-term debts its top rating.
The finance minister said Moody's decision reinforced the need for the government to pass a package of economic reforms that is proving unpopular with voters.
The ratings agency's move had not affected sentiment on the financial markets, which still held French debts in high regard, the government claimed.
"France still represents sound value. It is in second place just after Germany," said government spokesperson Najat Vallaud-Belkacem, speaking on French radio.
"Even today, investors lend to France in very favourable conditions. For example, we make short-term borrowings at negative rates, and that is going to continue."
Moody's said the primary reason for the downgrade had been France's "persistent structural economic challenges" and the threats they pose to economic growth and the government's coffers.
"These include the rigidities in labour and services markets, and low levels of innovation, which continue to drive France's gradual but sustained loss of competitiveness and the gradual erosion of its export-oriented industrial base," Moody's said.
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