Stock markets in Europe were stable Monday, although investors were still digesting Friday's news that Standard & Poors Inc. had downgraded France from its pristine AAA rating, Radio France Internationale reported.
The downgrade, especially if it is followed by downgrades at S&P or Fitch's, has the potential to jeopardize the President Nicolas Sarkozy's prospects for re-election.
A bond auction of short-term notes Monday was met with adequate demand. A more convincing test of investor confidence will come Thursday, when France attempts to auction up to $12 billion in bonds set to mature in two to 28 years.
Low demand will push yields higher, indicating low investor confidence and higher costs for the French government.