Moody's Investors Service has stripped France of its top government bond rating. The rating agency blamed the move on France's poor economic growth outlook and its exposure to contagion from indebted eurozone nations.
The euro dropped late on Monday after Moody's cut France's gold-plated AAA credit ranking by one notch to Aa1. France also saw its negative outlook maintained, meaning a further downgrade remains possible.
In a statement Moody's cited France's "disproportionately large" eurozone crisis exposure risk, adding that it was becoming increasingly difficult to predict how the country will manage eurozone shocks. It also alluded to France's continued lack of competitiveness.
"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 announced in a press release on its website.
"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."
In one glimmer of light, however, the agency noted that France's rating remained stable when compared to other eurozone nations. It also said the stability of its banks was extremely high by comparison.
The Moody's downgrade comes just ten months after a similar move from rating agency Standard & Poor's.
mkg/ccp (AFP, dpa, AP)