MOODY’S spared France a credit rating downgrade, easing pressure on a government struggling to contain social unrest and shore up its strained finances.
Moody’s said it had concluded a periodic review of its rating, leaving it at Aa3, which has carried a negative outlook since last October.
Bond markets had been pricing in a downgrade, which would have brought Moody’s in line with Standard & Poor’s and Fitch, which moved earlier as France struggled to rein in its public finances after a 2024 snap election produced a hung parliament and political paralysis.
The French finance ministry said in a statement that the fact Moody’s kept its rating unchanged reflected the “credibility of the budget the government has put forward in the 2027 finance bill, which is designed to keep our public finances on the path to recovery.”
The government is struggling to pass the bill in parliament, where opposition parties could refuse to compromise, reject the legislation and topple the government in a no-confidence vote.
“The Aa3 rating assumes that a deficit-reducing budget for 2027 will be adopted, while financing costs and social tensions will abate somewhat in the next few months,” Moody’s said in a statement.
French borrowing costs already exceed those of lower-rated peers such as Italy, as investors fret over the budget deficit – one of the euro zone’s biggest – and a presidential election on April 18 and May 2 next year that polls suggest the far right could win.
TV images of weekend protests descending into riots and looting underscore the political difficulty of pushing budget cuts through.
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