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French react to market squeeze on their banks

French react to market squeeze on their banks
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French President Nicolas Sarkozy has chaired emergency talks in Paris with his top ministers and central bank chief as the markets are abuzz with rumours the country’s AAA credit rating is heading for a downgrade.

He called for his finance and budget ministers to find fresh measures to reduce the deficit, over and above cuts already announced.

All three big credit rating agencies said France’s AAA status was in no immediate danger.

“The sovereign debt markets have eased, there has been an improvement despite market nerves which naturally needs to be underlined. So we need to keep a cool head and keep these events in perspective. But these measures have worked. They are solid,” said French Finance Minister François Baroin.

French banks are the most exposed to Italian and other peripheral euro zone public debt, and they suffered heavily in Wednesday’s trading. France is the most indebted of Europe’s six AAA rated economies, and has not had a balanced budget since 1974.