France strives to keep triple-A rating
France will do everything in its power to maintain its triple-A rating after Moody's warned it may place the country on negative outlook, Finance Minister Francois Baroin said on Tuesday.
"We will be there to preserve our triple-A rating... We will do everthing in our power not to be downgraded," Baroin told France 2 television after Moody's issued the warning, saying France's financial strength had weakened.
Baroin said that France had room to manoeuvre to protect its top credit rating which allows it to borrow at favourable rates.
"We have room to manoeuvre... We will take all the measures so there is no concern," he added.
"Everything has been put in place over the past three years to avert a downgrade."
Moody's fired a warning shot at France on Monday saying it would determine over the coming three months whether Europe's second largest economy merited its stable status given its weakening economy.
If Moody's changes the French credit rating from stable to negative following that assessment then that would signal a likely downgrade in future, something the French government is anxious to avoid as it would lift the cost of borrowing.
If that is the case, then France would follow in the unwilling footsteps of the United States.
In August, Standard & Poor's dealt the US its first-ever ratings downgrade.
France is rated triple-A by all three leading credit rating agencies, Moody's, Standard & Poor's and Fitch Ratings.
Moody's said France's "financial strength has weakened, as it has for other euro area sovereigns, because the global financial and economic crisis has led to a deterioration in French government debt metrics - which are now among the weakest of France's Aaa peers."
That deterioration and the potential for further liabilities to emerge "are exerting pressure on the stable outlook of the government's 'Aaa' debt rating," the ratings agency added in its annual report.
The agency said the French government "now has less room for manoeuvre in terms if stretching its balance sheet than it had in 2008," when the US sub-prime crisis spread worldwide and brought recession to Europe.
France's "continued commitment to implementing the necessary economic and fiscal reform measures" will be key if it wishes to retain its top credit rating", it added.
"Over the next three months, Moody's will monitor and assess the stable outlook in terms of the government's progress in implementing these measures," Moody's said.
The agency stressed that its current "stable" outlook for France reflects the economy's "strength, the robustness of its institutions and very high government financial strength."
The report also came as Germany dampened expectations that an upcoming EU summit will finally provide a solution to the eurozone debt crisis.
Meanwhile in Duesseldorf, German Finance Minister Wolfgang Schaeuble said that while EU leaders were set to "provide cover for uncertainty in financial markets", a permanent solution was unlikely to arise out of Sunday's summit.
He also warned that markets must rapidly stabilise if Europe is to avoid damage to its real economy.
Under intense pressure from their international partners at a meeting of G20 finance ministers and central bankers in Paris at the weekend, Europeans pledged to deliver at this weekend's summit.