Moody's keeps French AAA credit rating

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Ratings agency Moody's has said it is maintaining France's top AAA credit rating for now, three days after the country was downgraded by another agency, Standard & Poor's (S&P).

But Moody's said it would update its position on France later this quarter.

European stock markets were slightly higher on Monday, despite S&P's decision to cut credit ratings for France and several other EU countries.

Earlier, Asian markets had suffered slight falls.

Analysts said the downgrades came as little surprise to investors, given the recent woes suffered by eurozone economies.

However, euro currencies shrugged off the downgrades to finish on a high note at Monday's close.

Germany's Dax index was up 1.2%, the UK's FTSE 100 was 0.3% higher, while France's Cac 40 was up 0.9%.

Earlier, Japan's Nikkei index fell 1.5%, South Korea's Kospi slipped 0.8%, while Australia's ASX lost 1.2%.

Analysts warn markets will be volatile until the eurozone issues are resolved.

The euro also stabilised on Monday after falling on Friday. It was almost unchanged against the dollar, at $1.2675, and against the pound, at 82.67 pence.

'Priced in'

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Perhaps the most interesting reason for the downgrade was Standard and Poor's judgement that austerity alone might be self-defeating”

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On Monday, Moody's said the deterioration in France's debt position was "putting pressure" on the country's stable outlook.

Moody's said the French AAA rating might come under pressure if its public debt kept rising or if the eurozone debt crisis worsened.

Late on Friday, S&P said France was being downgraded by one notch, to AA+. France still has a top AAA rating from the other two ratings agencies, Moody's and Fitch.

S&P also cut its ratings for Italy, Spain, Cyprus, Portugal, Austria, Slovakia, Slovenia and Malta.

"A one-notch downgrade for France was completely priced in, so no negative surprise here, and quite logical after the United States got downgraded," said David Thebault at Global Equities.

The US was downgraded by S&P in August last year - losing its top-notch rating for the first time - on concerns about the country's high debt levels.

Credit ratings are used by banks and investors to decide how much money to lend to particular borrowers.

Greek write-off

S&P said it had downgraded the eurozone economies because of the failure of policymakers to take sufficient action to resolve the debt crisis.

It also said governments needed to do more than cut spending to tackle high debt levels, as this alone undermined consumer demand and, therefore, economic growth.

This week, all eyes will return to Greece, which has been negotiating with private creditors about taking losses on their Greek debts.

European leaders agreed in principle last year that private lenders would write off 50% of their loans to Greece, but talks on how this could best be achieved stalled last week.

Reports suggest the discussions are due to begin again in earnest on Wednesday. The successful conclusion of these talks is necessary if Greece is to receive the next tranche of its bailout funds.

The European Commission, the European Central Bank and the International Monetary Fund are also due to arrive in Athens early this week to assess whether or not to release these funds.

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