21-Nov-2012 | News and Image Source: Reuters

France has been stripped of its prized triple-A badge by Moody's, credit the sovereign credit rating on Europe's second largest economy by one notch to Aa1 from Aaa. Uncertain fiscal outlook and deteriorating economy were cited as the major reasons triggering the downgrade.

Structural challenges and a sustained loss of competitiveness in the country was how Moody's justified its negative outlook on France. Business leaders in the country have been blaming high labor charges for flagging exports.

Moody's said, "The first driver underlying Moody's one-notch downgrade of France's sovereign rating is the risk to economic growth, and therefore to the government's finances, posed by the country's persistent structural economic challenges". "These include the rigidities in labor and services markets, and low levels of innovation, which continue to drive France's gradual but sustained loss of competitiveness and the gradual erosion of its export-oriented industrial base".

Consequent to the downgrade, the euro slid by 0.30% against the dollar even though, according to analysts, the downgrade is mainly factored into the bond markets.

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