Is Moodys about to downgrade France’s AAA rating ? Well it has been reported in a number of sources including Irish Independent.

MOODY’S declared today that a recent rise in interest rates on French government debt – coupled with weaker economic growth prospects – could be negative for France’s credit rating.

The rating agency said the deteriorating market climate was a threat to the country’s credit outlook, but not at this stage to its actual rating.

Also a similar story has appeared in the Telegraph.

Worries about a high fiscal deficit and banks’ exposure to other troubled European sovereign debt have drawn France into the firing line of the bloc’s crisis, despite the government’s insistence it would do everything necessary to protect its top rating.

Moody’s announced in mid-October it could place France’s AAA rating on negative outlook in three months if the costs for helping to bailout French banks and other eurozone members overstretched the country’s budget.

Today, the rating agency said that a worsening in the French bond market – amid fears the sovereign debt crisis was spreading to the eurozone’s core – posed a threat to its credit outlook, though not at this stage to its actual rating.

“Elevated borrowing costs persisting for an extended period would amplify the fiscal challenges the French government faces amid a deteriorating growth outlook, with negative credit implications,” Moody’s said.

The premium investors charge on French 10-year debt compared to the German equivalent was up around 20 basis points at 163 bps following publication of Moody’s report but remained well short of the 202 bps hit last week, a new euro-era high.