(MENAFN - AFP) French President Francois Hollande warned the country Tuesday that it must "stay the course" and stick with a policy of straightening out the public accounts after Moody's stripped France of its coveted "Aaa" rating.
"We must take account (of the decision), pursue our policy, stay the course and understand that it is in our interest to correct our public accounts," Hollande told a gathering of French mayors.
He spoke less than a day after Moody's became the second of three leading agencies to cut its ratings on French government bonds, owing among other factors to the country's poor economic prospects, rigid labour markets, and financial risks from the eurozone debt crisis.
France has benefitted in recent months from ultra-low borrowing rates, and Hollande is keen to maintain that advantage as he tries to cut the public deficit and debt. To do so he must convince financial markets that he is serious about reforming the economy.
"This is what allows us to have interest rates that we have not seen for years on our sovereign debt," the French president noted.
He pointed out that even after the downgrade, which left France's rating at a very high level, "interest rates did not move and the spread with German rates remained exactly the same."
The difference between the rate a country must pay to borrow money on sovereign debt markets and that paid by Germany, the eurozone benchmark, is a common indicator of market confidence.
In January, Standard and Poor's was the first leading ratings agency to withdraw its highest rating on French debt, and Moody's followed suit late Monday, lowering its rating by one notch from the top "Aaa" to "Aa1".
Moody's also left its assessment of French debt on negative watch, which means it could lower the rating again in the future.