Moody’s lowers France’s credit outlook to negative over deficit woes and political tension
Ratings agency Moody’s downgraded the outlook on France’s credit rating to “negative” from “stable” on Friday due to concerns over the country’s debt and widening budget deficit.
Moody’s cited the “increasing risk that France’s government will be unable to implement measures that would prevent sustained wider-than-expected budget deficits and a deterioration in debt affordability.”
According to POLITICO, the decision comes amidst an apparent disagreement between French Prime Minister Michel and President Emmanuel Macron over the country’s public finances. Notably, Macron has declined to publicly endorse Barnier’s plan to tackle the deficit through tax hikes and spending cuts.
“The fiscal deterioration that we have already seen is beyond our expectations and stands in contrast with governments in similarly rated countries that are tending to consolidate their public finances in the current environment,” Moody’s said.
Earlier this month, Fitch Ratings also affirmed France’s rating at AA- and revised its outlook from “stable” to “negative,” highlighting increasing fiscal and political risks.
Both rating agencies attributed the decline to France’s political fragmentation, which seems to hinder the country from reaching its fiscal targets.
PM Michel Barnier is hoping to bring the public sector deficit to below five percent of gross domestic product next year, from an expected 6.1 percent in 2024.
He presented France’s 2025 budget, which includes 60 billion euros’ worth of spending cuts and tax hikes, mostly targeting big companies.
Meanwhile, France’s debt is expected to rise to close to 115 percent of GDP next year, compared to an EU debt target of 60 percent.
France’s debt reached over 3.2 trillion euros, an increase of approximately one trillion euros since President Emmanuel Macron took office in 2017.
