Nov. 20 - French officials have leapt to the defence of their economy, after Moody's became the second ratings agency to strip Paris of its AAA rating. Analysts say France has some fundamental problems such as its lack of competitiveness, but some say the downgrade may give President Hollande more freedom to bring in reforms. Joanna Partridge reports
French politicians were outraged by this magazine cover last week but Moody's, it seems, shares some of their concerns. The ratings agency has stripped France of its prized triple-A rating, blaming the uncertain fiscal and economic outlook. Standard and Poor's had already downgraded Paris back in January. Pierre Moscovici is the country's Finance Minister. SOUNDBITE: Pierre Moscovici, French Finance Minister, saying (French): "This rating change in no way places a question over the fundamentals of our country's economy, neither the reforms undertaken by the government, nor the quality of the signature on our debt. I would like to point out that France's short-term credit rating remains at the highest level. The medium-to-long-term rating has been cut by one notch." The downgrade will be a blow for President Francois Hollande, who's trying to fix France's finances. He was elected on promises to boost growth and cut unemployment. The French economy is facing three major problems, says Carsten Brzeski from ING. SOUNDBITE: Carsten Brzeski, Senior Economist, ING, saying (English): "First one is really the lack of competitiveness. The second one are unhealthy, almost unsustainable public finances, third one is high unemployment and the lack of private consumption. So the combination of these three factors makes France probably the next sick man of the euro zone." Hollande's government has unveiled a package of measures to boost competitiveness - including 20 billion euros in annual tax relief for companies. Analysts say the downgrade may now actually strengthen the case for reform, says Jan Lambregts from Rabobank. SOUNDBITE: Jan Lambregts, Global Head of Financial Markets Research, Rabobank, saying (English): "Mr Hollande has played an interesting game of course. If you think of it, he came with a big agenda, but in the end when he presented the whole of his plans it was about deficit control. So he was a little bit of a wolf in sheep's clothes there if you consider that." Officials say the planned reforms will improve France's performance and help it keep up with neighbour Germany. The downgrade had already been priced in by the markets - French bond yields hardly changed, so it should be able to keep borrowing at historically low levels.