Moody's downgrades credit rating

CREDIT ratings group Moody's has dropped France's rating from AAA to AA1 and kept its 'negative' outlook for the country.

It follows Standard & Poor's decision to downgrade its French rating in January. The country now only maintains the top AAA mark with Fitch.

Government spokesmen have said the move was not a surprise and have sought to place the blame for the drop in confidence of France to pay its debts on the policies of the previous administration.

However, Moody's decision to retain a 'negative' outlook, a hint it is considering a further drop in ratings, means it does not consider the government's promised reforms are enough.

Moody's said France's "persistent structural economic challenges" were the reason for the downgrade.

This include “rigidities in labour and services markets, and low levels of innovation” which Moody's says are leading France to lose global competitiveness.

PM Jean-Marc Ayrault recently announced a €20bn tax credit for French businesses, to be spread over the next three years, to help with the cost of employing people.

The downgrade could affect France's budget as the country will find it slightly more expensive to borrow money.

Finance Minister Pierre Moscovici said that French debt was still among the most secure in the world and added that the downgrade was further reason to pursue economic reforms.

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