Moody’s changes France’s credit outlook from ‘stable’ to ‘negative’
(MENAFN) Moody’s has changed France’s credit outlook from ‘stable’ to ‘negative,’ pointing to political “fragmentation” that could undermine the country’s capacity to address major policy challenges, according to reports.
France, the European Union’s second-largest economy, has struggled to control public spending as its debt hovers around 115% of GDP amid ongoing political instability.
President Emmanuel Macron’s government has operated without a parliamentary majority for two years, leaving power divided among three competing blocs. During this period, the country has seen five prime ministers, with current leader Sebastien Lecornu narrowly surviving two no-confidence votes in October after halting a controversial pension reform. The government has also been unable to pass the 2026 budget due to resistance to spending cuts and tax increases.
Moody’s noted that the revision reflects “the increased risk that the fragmentation of the French political landscape will continue to harm the functioning of legislative institutions,” warning that instability could impede efforts to reduce deficits, debt, and borrowing costs.
The agency also highlighted the “risk of a sustained rollback of certain previously adopted structural reforms,” particularly the pension reform raising the retirement age to 64. Delays in implementation, it said, could “exacerbate fiscal challenges and negatively impact potential growth by reducing labor supply.”
Despite the negative outlook, Moody’s retained France’s Aa3 credit rating, citing solid household and corporate finances and a strong banking system. Analysts warned, however, that the negative outlook could eventually lead to a downgrade if reforms and fiscal measures are not swiftly enacted.
Moody’s follows Fitch and S&P Global, which recently downgraded France to single-A, citing political deadlock, weak investment, and fiscal concerns. Experts cautioned that these downgrades might force investors restricted to high-grade debt to sell French bonds. France’s ten-year yield was 3.4% on Friday, nearly equaling Italy’s, the EU’s lowest-rated economy.
Legal Disclaimer:
MENAFN provides the
information “as is” without warranty of any kind. We do not accept
any responsibility or liability for the accuracy, content, images,
videos, licenses, completeness, legality, or reliability of the information
contained in this article. If you have any complaints or copyright
issues related to this article, kindly contact the provider above.
Legal Disclaimer:
EIN Presswire provides this news content "as is" without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the author above.
