France says debt downgrade rumours unfounded

PARIS Tue Jan 8, 2013 8:38pm IST

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PARIS (Reuters) - Rumours of an imminent downgrade in France's sovereign debt which briefly moved some financial markets on Tuesday are unfounded, French officials said.

"Rumour unfounded and false," Finance Ministry spokeswoman Safia Otokore said on her Twitter feed. Minutes earlier, a senior French official told Reuters the rumours were erroneous.

French bond yields had risen marginally amid the rumours that a rating agency was preparing to downgrade the debt of the euro zone's second-largest economy.

European shares briefly slipped on the talk but rose after the denials. At 1446 GMT, the FTSEurofirst 300 index was up 0.16 percent at 1,163.49 points, after turning almost flat as the rumour surfaced.

Standard and Poor's and Moody's stripped French debt of their top ratings last year and a third major rating agency, Fitch, affirmed its AAA rating on France with a negative outlook as recently as mid December.

It said at the time there was a slightly greater than 50 percent chance of a downgrade, which would hinge on reforms and the government's efforts to get debt levels to begin falling in 2014.

Despite weak growth, President Francois Hollande's government has repeatedly stressed that it will stick to its plans to cut the public deficit to 3 percent of economic output this year from an estimated 4.5 percent in 2012.

Finance Minister Pierre Moscovici said in Beijing on Tuesday recent French bond auctions, which attracted record low borrowing rates, were a sign of investor confidence in the French economy.

(Reporting by Jean-Baptiste Vey; Writing by Leigh Thomas; editing by Mark John)

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