Fresh week of woes for France

It's been a difficult week for French president, Francois Hollande, and it might get worse as rumors and analysts suggest the country's debt rating is about to be cut.

Earlier this week, France's reshuffled government got off to a shaky start after narrowly winning a confidence vote on key economic reforms, marked by growing discontent from Socialist ranks. And on Thursday, the president faced hundreds of journalists during his bi-annual press conference, once again overshadowed by his private life following the release of his former partner's tell-all book "Thank You For This Moment".

To add a final nail in this week's coffin, the French Opinion newspaper reported on Thursday that the government had been notified that credit rating agency Moody's would downgrade the country's rating; a report the government swiftly denied.

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If Moody's does downgrade its rating of France – to AA2 from AA1 – it will catch up with the other major credit ratings agencies S&P and Fitch who both downgraded their ratings in November and July 2013 respectively.

A downgrade "would be warranted", Jennifer McKeown, senior European economist at Capital Economics told CNBC. For Francois Cabau, European economist at Barclays, a Moody's rating cut wouldn't come as a surprise, "particularly in light of recent events".

Read MoreSarkozy stands by as France's socialists suffer

France's attempts to contain and bring its public deficit down to levels agreed by Brussels have repeatedly failed. The French finance minister, Michel Spain, announced on September 10 that the country would break its fiscal promise to bring deficit at or below 3 percent of gross domestic product by 2015.

"With growth and inflation weak, the deficit reduction we are planning for 2015 will be limited with a deficit around 4.3 percent of gross domestic product in 2015 and coming under the three percent threshold in 2017," Sapin said at the time.

Getting back to where it needs to be fiscally, "has been a little bit of an issue for France", said Brenda Kelly, chief market strategist at IG as growth stagnated in the first half of the year.

With growth expected to remain "far below what you would normally consider normal for France", according to Jennifer McKeown, "there will be a lot of spare capacity in the economy, so unemployment is likely to remain very high and inflation very low".

Additionally, explained Barclays's Francois Cabau, France's "debt charge will definitely increase" due to the combination of slow growth and high public deficit.

Negative outlook

"The key thing for us is that we need to monitor the outlook quite closely and whether they'll keep on having a negative outlook", said Cabau.

Moody's has retained a negative outlook on France since February 2012, several months before it stripped the country of its AAA rating.

Read MoreFrance: Braced for a 'tough autumn'

But Francois Hollande seems to be on a reforming track. Since January of this year, the French president has been criticised by his fellow left-wingers for taking a more liberal turn by unveiling pro-business reforms such as the Responsibility Pact which aims to cut red tape and lighten labor costs.

He then alienated himself further from the left-wing of his party by ousting former Economy Minister Arnaud Montebourg in a surprise reshuffle in late August, and installing former Rothschild banker, Emmanuel Macron.

At his bi-annual press conference on Thursday, Francois Hollande reaffirmed his pro-reform stance and sought to soothe relations with Germany –which French left-wing politicians often blame for France's economic struggles – ahead of Valls' visit to Berlin next week.

"Our German friends are perfectly right to remind us to reform", he said, adding however than it would be difficult for France to "achieve in five years what our German friends did in 10, in a very favourable economic environment and without public deficit constraints".

The appointment of "reform-minded" Emmanuel Macron is a positive, says Jennifer McKeown, as the new economy minister has already hinted at labor market reforms, including a willingness to alter the country's sacrosanct 35-hour working week.

"But that said, these things will take a very long time to have any effect. That will take decades to really feed through to the economy".

Read MoreFrance's 35-hour working week under threat

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