France's loan rate little affected by Moody's downgrade

Moody’s decision to lower France’s rating from Aaa to Aa1 had little effect on markets or lending rates on Tuesday morning. The Socialist government blamed the previous right-wing administration for the ratings agency’s decision.

Reuters/Mike Segar

“The markets don’t seem very worried by this decision,” government spokesperson Najat Vallaud-Belkacem told France Inter radio shortly after the stock exchange opened.

France’s 10-year lending rate rose only slightly from 2.08 per cent to 2.10 overnight and the Cac-40 stock market fell 0.49 per cent to 3,422.58 points, while Frankfurt fell 0.23 per cent, London 0.40 per cent and Madrid 0.37 per cent.

“This decision is not a condemnation of the policy carried out by this government – we’ll see that in several months – but that carried out up until now by the previous government,’ Vallaud-Belkacem insisted.

A Moody’s analyst told Reuters Tuesday that the agency could downgrade France again.

The agency believes France’s opportunities for growth to have been reduced and thinks the governments prediction of 0.8 per cent in 2013 is too optimistic.

Moody’s would downgrade again if the economic perspectives become worse, the agency’s France analyst Dietmar Hornung told the wire service, stressing that he was keeping an eye on negotiations aimed at lowering labour costs currently taking place.