French AAA rating under threat

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RATINGS agency Moody’s has warned that it may place France’s top AAA economic rating on “negative outlook”.

This would be a sign that if things do not improve, then France’s AAA may well be lowered within the next year or so – in which case the country would follow in the footsteps of the USA, which has seen its rating lowered by one of the other two top agencies, Standard & Poor’s.

At present France is rated AAA by all three (the other is Fitch Ratings) which allows it to borrow at favourable rates to finance budget deficits.

Moody’s said it is giving itself three months to determine whether or not France still merits a “stable” outlook, considering the way the economic situation has been worsening.

A spokesman said the current description was due to the French economy’s "strength, the robustness of its institutions and very high government financial strength."

To maintain it, it would need to show "continued commitment to implementing the necessary economic and fiscal reform measures," the agency said.

However it is concerned about likely challenges to come for France “such as the necessity to give extra support to other European countries or to its own banking system”.

This comes as European leaders discuss measures to protect the euro from a possible Greek default. France and Germany are taking the lead in a plan being presented at a summit on Sunday.

Finance Minister François Baroin said on France 2: “We are here to maintain this AAA. It is necessary to protect our social security system. We will put everything in place so as not to have the rating lowered.”