November 20, 2012 - 11:35 AMT
PanARMENIAN.Net - Moody's stripped France of its prized triple-A badge on Monday, Nov 19, cutting the sovereign credit rating on Europe's No. 2 economy by one notch to Aa1 from Aaa, citing an uncertain fiscal outlook and deteriorating economy, Reuters reported.
The downgrade, which follows a cut by Standard & Poor's in January, was widely expected but is still a blow to Socialist President Francois Hollande as he strives to convince the world he can fix France's public finances and stalled economy.
Moody's said it was keeping a negative outlook on France due to structural challenges and a "sustained loss of competitiveness" in the country, where business leaders blame high labor charges for flagging exports.
"The first driver underlying Moody's one-notch downgrade of France's sovereign rating is the risk to economic growth, and therefore to the government's finances, posed by the country's persistent structural economic challenges," Moody's said.
"These include the rigidities in labor 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 had been waiting to examine Hollande's 2013 budget and his response to a review of industrial competitiveness before adjusting its view on France as a sovereign lender.
Standard & Poor's has rated France AA-plus, with a negative outlook, since downgrading it by one notch in January. Fitch Ratings still has France at AAA, also with a negative outlook.