Moody's strips France of AAA rating

Credit ratings agency Moody's, which stripped France of its AAA rating, would further downgrade its creditworthiness if the Socialist government failed to implement announced reforms, according to its lead France analyst.

Dietmar Hornung, Moody's lead analyst for France's sovereign rating, told Reuters that the agency would downgrade the sovereign rating further in the event of an additional material deterioration in France's economic prospects or in a scenario in which there were difficulties in implementing the announced reforms.

The ratings agency cut France's Aa1 rating with a negative outlook yesterday, citing structural economic challenges and a sustained loss of competitiveness in the second-largest economy in Europe.

According to Hornung, France also remained vulnerable to external shocks from the euro zone crisis, especially given the strong links between its economy and financial sector and those in troubled southern European countries.

In the event of substantial economic and financial shocks from the euro area debt crisis, it would also exert downward pressure on the rating of France.

According to Hornung, France's 2013 budget, which included €30 billion in deficit-cutting measures as also a competitiveness pact unveiled this month aimed at reduction of labour costs of companies.