The rating agency Moody’s has maintained France’s sovereign rating, while issuing a warning about the risk of deteriorating economic conditions. This is the third warning France has received in a month.
Moody’s maintains its rating but changes its outlook
After Fitch and S&P, it was Moody’s turn to update France’s sovereign rating. It maintained the rating at the fourth level (AA3), but changed its outlook from “stable” to “negative.”
Moody’s highlights France’s political situation and warns about delays in adopting the 2026 budget. According to analysts, this situation greatly weakens France’s economic outlook:
Political instability may hamper the government’s ability to address major policy challenges, such as the high budget deficit, rising debt, and sustained increases in borrowing costs.
Moody’s also points to the suspension of pension reform, which it considers harmful to the economy in the long term:
[The suspension] could exacerbate the government’s budgetary difficulties and negatively affect the economy’s potential growth rate by reducing the labor supply.
Third warning from rating agencies
Rating agencies, which assess a country’s ability to repay its debt, regularly assign a rating that measures the risk of default. France, previously a global star pupil, has gradually slipped down the rankings.
Within a month, the other rating agencies, S&P and Fitch, both downgraded France’s rating from AA- to A+, the fifth-best rating that can be assigned. France’s political situation is worrying at a time when the country seems unable to agree on a budget.
Economy Minister Roland Lescure responded to Moody’s assessment, stressing the importance of finding a compromise in the National Assembly:
This decision highlights the absolute necessity of building a collective path towards a budget compromise.
The Assembly’s powder keg in the face of budget demands
Without a majority, Prime Minister Sébastien Lecornu had taken a step towards the Socialist Party in recent weeks by announcing the suspension of pension reform. But the party is pushing its advantage: it is demanding the adoption of the Zuckman tax, under threat of censuring the government.
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The particularly precarious balance in which the government finds itself therefore makes it very difficult to adopt a budget that will reduce the French deficit by December, a goal that Roland Lescure has nevertheless reiterated:
The government remains determined to meet the deficit target of 5.4% of GDP announced in 2025 and to pursue an ambitious path of public deficit reduction to return to below 3% of GDP in 2029, while preserving growth.
