Moody's downgraded France's AAA credit rating, the highest designation, to AA1 on Monday.
In a statement the credit rating agency said France's "long-term economic growth outlook is negatively affected by multiple structural challenges, including its gradual, sustained loss of competitiveness and the long-standing rigidities of its labor, goods and service markets."
The agency added, "France's fiscal outlook is uncertain as a result of its deteriorating economic prospects, both in the short term due to subdued domestic and external demand."
France's Finance Minister Pierre Moscovici told a news conference Tuesday, "The rating change does not call into question the economic fundamentals of our country, the efforts undertaken by the government or our creditworthiness."
David Thebault, head of quantitative sales trading at Global Equities, told Reuters the downgrade was expected.
"This was priced in, really," he said. "The market has been expecting it for more than a year now. It might have an impact on the short term, but it won't last. All in all, CAC 40 companies are big multinationals, they won't be impacted by this."
The rating agency Standard & Poor's downgraded France's credit rating in January from AAA to AA-plus, one notch down. Fitch still has France at AAA.
President Francois Hollande has said he will reduce the deficit to 3 percent by 2013.