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DEBT CRISIS

RATINGS agency Moody's warned French President Nicolas Sarkozy (below) it may place a negative outlook on its vital AAA credit rating in the coming months.

France currently enjoys the top rating from the agency but 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".

The deterioration and the potential for further liabilities to emerge "are exerting pressure on the stable outlook of the government's AAA debt rating", it added in its annual report.

France now has "less room for manoeuvre in terms of stretching its balance sheet than it had in 2008".

It said: "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."

France also enjoys the top credit rating from the Standard & Poor's and Fitch, giving investors the confidence to lend to France at favourable rates.

If Moody's changes the French credit rating from stable to negative, it would signal a likely downgrade in future -- which would lift the cost of borrowing.


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