Moody's affirms France rating at Aa1; outlook remains negative - Moody's decision to maintain the negative outlook was driven by the following key interrelated factors: (1) the continued reduction in the competitiveness of the French economy, which risks lowering its long-term growth prospects, as well as (2) the risk of a further deterioration in France's government financial strength. This is reflected in the significant increase in the general government debt-to-GDP ratio to 93.6% in 2013 from 90.2% in 2012, and Moody's expects a further increase to above 95% by the end of 2014. - Although the French government has introduced or announced a number of measures intended to address these competitiveness and growth issues, the implementation and efficacy of these policy initiatives are complicated by the persistence of long-standing rigidities in labour, goods and services markets as well as the social and political tensions the government is facing. Moreover, in Moody's view, France's fiscal policy flexibility is limited, which, together with the policy challenges noted above, imply a continued risk of missing fiscal targets. - At the same time, Moody's has affirmed France's Aa1 government bond rating. Credit positive rating factors that support the affirmation include: (1) France's large and diversified economy which underpins the country's economic resiliency; and (2) the currently modest interest burden relative to total government revenues associated with the government's debt (i.e. its very high debt affordability) as a consequence of its strong investor base, a large tax revenue base, and low funding costs. Moreover, the risks to the French government's finances associated with the euro area debt crisis have -- at least for now -- abated and French banks' direct exposures to peripheral Europe have diminished. **NOTE: S&P cut France to AA in November, and Fitch cut it to AA+ last July. Moodys cut France to Aa1 rating in November 2012