Moody's decision to downgrade France's sovereign debt means it believes the risk of the country defaulting on its debts has increased. If investors in French government bonds lose confidence in Paris's ability to repay, then they will demand a higher premium on their loans. That would make it more expensive for the country to borrow on international markets.
Countries such as Greece, Ireland and Portugal have been effectively shut out of borrowing long term on international financial markets, which forced them to seek help from European partners and the International Monetary Fund.
French banks are exposed to the troubled eurozone economies, and its rigid labour market is also harming competitiveness. The IMF has warned that France's economic outlook would deteriorate if it failed make deep spending cuts like Greece, Italy and Portugal.
The international lender predicts economic growth of a mere 0.4% in 2013, up from 0.1% this year. Meanwhile, French business leaders "are in a state of quasi-panic," according to Laurence Parisot, the head of the employers' association Medef. "The pace of bankruptcies has accelerated over the summer. We are seeing a general loss of confidence by investors. Large foreign investors are shunning France altogether. It's becoming really dramatic."IT AIN'T GETTING BETTER IN EUROPE; IT'S GETTING WORSE. STAY TUNED....