Moody's confirms France's triple-A credit rating

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Moody's on Monday confirmed France's triple-A credit rating but said it was still reviewing whether it would maintain its 'stable' outlook for the debt-laden country.

The announcement came three days after rival agency Standard and Poor's downgraded France's top rating by one notch, dealing a severe blow to President Nicolas Sarkozy's reelection prospects.

Sarkozy made an appeal Sunday for calm in the wake of the downgrade and said he would introduce more reforms to get France back on track.

Fitch, the third major ratings agency, has also kept France at its top level and said it has no plans to change it this year barring a major disaster.

Spain and Italy were hit by double downgrades in the S&P report card, piling pressure on governments and the euro in the run-up to an EU summit on January 30 that is supposed to confirm details of a tough new fiscal pact.

Moody's said in mid-October it would take three months to consider whether France should be downgraded.

It warned in November that a rise in borrowing costs on French government bonds and slowing growth could have a negative effect on France's rating.

It said Monday: "We will update the market (on the outlook for France) during the first quarter of 2012 as part of the initiative to revisit the overall architecture of our sovereign ratings in the EU."

The agency warned that "adverse economic or financial market developments would also pressure France's credit rating, including a further deterioration in the European debt crisis."

It said France's commitment to implementing economic and fiscal reform as well as 'progress in achieving the targeted sustainability improvements will be important for the stable outlook to be maintained'.

The French government aims to reduce the general government deficit ratio to 3.0 per cent of Gross Domestic Product in 2013 from 7.1 percent in 2010 and to achieve a balanced budget by 2016.

Sarkozy has already pushed through two austerity packages, saying they were necessary to defend France's top rating. But he has promised there will be no further austerity packages this year.

European stock markets stabilised on Monday after opening slightly down but the true test of the effect of France's humiliating downgrade will come on Thursday, when it conducts its first large-scale bond auction as an S&P AA+ rated economy.