Moody's downgrades France rating citing slow growth

[WASHINGTON] Moody's cut France's sovereign debt rating one notch to Aa2 on Friday, saying the country will struggle with slow growth and a high debt burden for the next five years.

"The current economic recovery in France has already proven to be significantly slower - and Moody's believes that it will remain so - compared with the recoveries observed over the past few decades," Moody's said.

"France faces material economic challenges, such as a high rate of structural unemployment, relatively weak corporate profit margins and a loss of global export market share that have their roots in long-standing rigidities in its labor and product markets," Moody's said.

The result will be slow growth over the medium term that will stand in the way of "any material reversal in France's elevated debt burden in the foreseeable future," the agency said.

The downgrade was by one notch from the previous Aa1 rating. France lost its top-flight Aaa rating in November 2012 as the eurozone sank into crisis, and the new rating is two steps below that.

Moody's said that France's credit-worthiness "remains extremely high" overall and gave the new rating a "stable" outlook.

Supporting that is "the country's efforts to stabilise its public sector finances and initiatives recently deployed or announced to arrest the erosion of the economy's competitiveness," it said.

In a statement after the ratings downgrade, French Finance Minister Michel Sapin stressed that France's credit-worthiness remained solid.

"The government remains strongly committed to pursuing and expanding its reform policy, aimed at enhancing the growth and employment potential of the French economy," he said.

AFP